Meltdown Bullet Points

Always willing to punch above my weight, I unburdened myself before a bunch of bankruptcy lawyers this noon on the late uproar. Always eager to oversimplify, I came up with four matched sets of bullet points:

• Housing Bubble or--? I think this one almost answers itself. Housing peaked in 2006; banks didn't melt down until 2008. So, a housing bubble that put a spear into a fragile and vulnerable banking system. Note that this is the first financial crisis top metastasize since 1931.

• Liquidity or balance-sheet? Bankruptcy lawyers grasp this one: "bankruptcy insolvency" v. "equity insolvency." As phrased, the question again probably tips the hand of the answerer. We had the mother of all liquidity crises in 2008, but we've got a balance-sheet problem that looks like it will stick around for years.

• How did we get where? "Bleeding Gums" Murphy or Banana Republic? The "Bleeding Gums" school holds that it was all the fault of the undeserving poor who wanted to become the undeserving rich and took on loans they could not possibly repay, thereby destroying the world financial infrastructure (they had help from Jimmy Carter, Chris Dodd and Barney Frank). The Banana Republic school holds that we've become a nation where a small and entrenched elite has come to regard the government as its dedicated honey pot. I suspect there is at least enough truth in either of these views to offend those who embrace the opposite.

• What do we do next? As in: do we slash the budget or turn on the printing press? This is the pairing that I find hardest to reduce to a soundbyte. But it is the utter discontinuity on this issue--the array of respectable professorships on each side of the case--that does most to enhance the suspicion (a suspicion that I do not embrace)--the suspicion that economics has not yet advanced beyond the realm of campfire fairy tale.

I shared the platform with a working bankruptcy judge who described to us in edifying detail how much his life is dominated by the busted-up mortgage and how he doesn't see any end of it in sight. We passed on discussing the Financial Reform Act; I can't speak for my colleague but I figure it will be another year before we know how completely the lobbyists defang it in rule-making. I did hear somewhere, however, that Mary Schapiro has already said she'll need another 500 employees at the SEC. Insert your own stimulus joke here.