I’ve not been reporting or analyzing on the current state of the financial meltdown very much in the last week.  That’s at least in part because things are moving so fast at the moment and statements are coming from so many different quarters, it’s difficult to keep up with in a meaningful way.  I don’t see any reason to add to the din unless I can provide something on the order of a coherent statement, which at the moment is difficult.

But one thing I can say for certain is that the speed of the recovery effort is more troubling than the speed of the crisis, at the moment.  There’s lots of big headlines and breathless discussion in the media, but let me say that no one in a position of authority should have been surprised by what is happening now.  The subprime/ARM mortgage meltdown has been going on for eight months and it is on the basis of commoditized mortgages that a lot of wealth has been built which is now disintegrating.  Where were all these leaders while Secretary Paulson was handing out bailouts?  Where were the big questions that might have provided us a more organized solution?

And now that we’re trying to come up with a national solution to a problem, I am drearily unsurprised to see that the problem at hand is largely rich people losing money.  No one cared when some grubby poor people were losing thier homes, but now that large bank executives are in danger of losing their yachts, it’s all hands on deck.  So, now the Congress is expected to hand over $700bn dollars to the White House that brought us Katrina and Iraq without strings.

Here’s a question that’s worth asking: what, precisely, is the purpose of all these billions of dollars?  Irrespective of what we do in the short run, there is nothing more fundamental to this crisis than the fact that all of the wealth accumulated in the last ten years or so was built on an entirely false pretense: the notion that these mortgages were going to be paid off.  No matter what we do in the next three months, a breathtakingly large portion of global wealth is about to evaporate.  Irrespective of whom does the selling – the government or the banks – the bad debts which are the basis of the problem will necessarily be sold at fire-sale prices.

The plan as far as I can tell is that the White House wants to buy up bad debt – whose value is in free-fall – from banks at a fixed price.  Guess whom that benefits?  If you guessed “the banks,” you’re spot-on.  Because we’re never going to get our $700bn back from selling those assets.  It’s like buying a bag of over-ripe bannanas.

I think Hank Paulson is a genuinely disciplined and principled person, based on what I know of him and what I see of him in interviews.  I’m watching him on This Week right now, and there’s no question he’s freaked out, but he’s clearly trying his best to solve a problem for which there are no easy answers.  And of course, if it’s up to you to solve the problem, you’d want as few strings attached to the money you need just in case the first idea doesn’t work the way you’d hoped.

But it’s worth all of us taking a breather for a moment and considering how we got here and whether what we’re doing is going to improve the future.  In my estimation, without stipulating some sort of reforms in addition to the bailout, we are doing very little for our future much past the first ten years when such “superfunds” and mortgage-based investments will be highly unappetizing to “the market.”

By Tommy Belknap

Owner, developer, editor of DragonFlyEye.Net, Tom Belknap is also a freelance journalist for The 585 lifestyle magazine. He lives in the Rochester area with his wife and son.