Where's the Glass-Steagall Act when you need it?

I don't know about anybody else, but I am no economic expert. I am also very uneasy with both presidential contenders responses to the sudden collapse of Wall Street institutions. How did this happen and why does everybody seem so surprised about it? And how about my STRS Ohio retirement plan? Will there be anything there when I eventually retire?

I decided to ask someone who actually has studied economics and knows a heck of a lot about the subject. He has agreed to let me post his responses here. You might be surprised to read that Joe Biden, for example, is one of the culprits, along with Bill Clinton -- and a whole host of other folks to be sure.

Once we understand how the current financial crisis came to be, there are many more questions to ask, such as where are all the billions coming from that the government is promising to prop up the likes of Franny and Freddie and AIG? And do either Obama or McCain have any clear and detailed plans that might actually work?

Here are my questions with unedited responses from my friend ACB. (Be sure to follow the link to the Progressive Historians web site for everything you need to know about the Glass-Steagall Act.) Readers responses are more than welcome:

"What's your take on all the collapsing going on on Wall St? "

Two main things:
1/ Credit markets are hosed due to the violent collapse of the housing bubble. Housing bubble was caused by the completely-inevitable irresponsible lending which took place, and accelerated, ever since the Glass-Steagall Act was repealed in 1999. Short, informative article here:
Value of the Dollar is hosed due to rising cost of fossil fuels, caused by inevitable economic expansion of formerly dirt-poor third world nations. China is becoming the next Japan, India is becoming the next China, etc etc etc. U.S.Government response to this dynamic has been worse than useless.

"Who is to blame?"

Plenty of blame to go around. Bankers always respond to government policy incentives; these incentives are set in place by politicians; pol's incentives are set in place by voters; voters are morons.
1/ Bill Clinton and a Republican Congress worked together to destroy Glass-Steagall. The greedfest which followed was an inevitable matter of incentives being responded to. It's an echo of the S&L meltdown of the late 20th century, from which our elected officials of both big parties learned absolutely nothing.
2/ George Bush and a Democrat Congress worked together to mandate that all the gasoline available in America should be diluted with corn liquor. Consequently: a/ the gasoline is crappier and less efficient, b/ air pollution worsens AND energy costs rise, because of the extra step of industrial processing required to make that happen, and c/ one quarter of last year's corn crop, and one third of this year's corn crop, are consumed to replaced One Percent of the gasoline supply, d/ leading directly to food becoming much more expensive, both in the USA where we can kind of afford it, and across the entire rest of the world where they can not afford it at all.

" Will my pension be there in 15 years? Etc..."

It's a crapshoot.
1/ Credit markets will be tinkered with by high-powered government doofuses in ways that defy prediction, completely. Left alone, they could conceivably self-repair over maybe 3 to 5 years; but they will not be left alone. That's not election-outcome-dependent.
2/ Currency values will self-repair, but it will take too long and cost too much. Partly that's election-outcome-dependent:
2a/ Cost of energy will positively worsen under an Obama/Pelosi no-nukes, no-drilling regime.
2b/ Cost of energy will still worsen, much less drastically, under a McCain/Pelosi regime.
2c/ Cost of energy might level out under a McCain/(generic republican) regime. Two hundred winged monkeys might fly out of my ass and hand everybody in Ohio a winning lottery ticket, in an equally-likely outcome.

Is your pension hosed? Yes, probably so. Mine too.