The question nodody asks: Why is Credit Frozen?

A few days ago I posted that this is a crisis of ideology not finance. That was not fully clear. The Credit Collapse is a symptom of an organ failing, a part an organism that has been bingeing because it's been told it can do no wrong, no harm can come to it if it pursues it's desire for pure self-interest. Some call this consumerism. Some call it the American Dream--life, liberty and all that.

How'd this discrepancy happen? Well, absent grownups to remind me that things that go up invariably come down, I tend to get used to the idea that things going up will always do so. These absent grown-ups? They, or it, would be called functional, diligent oversight. Or the belief in it.

To me, this isn't about liquidity per se but rather, about the reality of reality itself catching up to the mark-to-model and mark-to-market methods of financial services of the last few decades. (Mark to model is the theoretical accounting of Enron and other recent flameouts--basically rosy scenarios on crack.)

Sounds complicated? Most of the blameworthy would like us to think so. Let's try and clarify.

Look at it this way, from their perspective: IF YOU'VE been selling smoke and confusing ponzi schemes for years you start to worry that too MANY OTHERS are doing the same and suddenly if only types like you are available to deal with--in a market ostensibly reliant on trust and sentiment--well, then, MAYBE NOBODY's TRUSTWORTHY and the best thing to do is reset and take a mulligan. Or, to continue the golf parlance, to turn in your card and self-disqualify.

But no one in positions of responsibility is willing to do that latter thing, to banish themselves as the abject giddy and greedy failures they have been. They have PhDs in Economics and Finance, after all. They write the fine print!

And that's where we are - top tier banks and investment houses doubled down serially, and so often, that everybody's bluffed out and faithless. Nobody trusts anybody, and everybody's in flopsweat. And when the titans start sweating, and conserving any capital they have "just in case," we mere mortals feel it shower as a gear-rusting, road-blocking downpour that shorts out our ability to do day-to-day business. That, in my goofy metaphor-drenched opinion, is where we are.

That the market is choking off "liquidity"--cashflow and credit flow--is a symptom of its overdue diagnosis: too much play, too many lies, too little seriousness.

The problem is limbic and fundamental. Stop lying, stop avoiding responsibility, stop hiding behind the cleverness; it's over. Admit the failure you knew was coming long ago, and that which is still half-hidden under the rug. Take your medicine is what the market is saying. And also, what the public thinks ought to happen - "I get no pass, no bailout for stupid greedy choices." That would be the way, in a truly free market, death and destruction a la Lehman, IndyMac Bank etc and so on.

But it isn't. Their best answer to an anxious and desperately curious electorate could be construed so far as: Flounder, you fucked up. You trusted us.

Can I ramble some more in search of some clarity?

We have something like 45 trillion of US home ownership paper, maybe 15% added in the last 10 years, that are potentially, really worth 30 trillion in a true free market. Underlaying this are myrid financial instruments, an alphabet soup of insurances, derivatives, IOUs and promissory notes, worth tens of trillions more, and few of which can be reliably valued in a world with laws of actual financial gravity.

This soup, then, is as much if not more of the worry that Fed Chief Bernanke and Treasury Secretary Paulson used to most likely drain the blood from the faces of Congressional leaders over a week ago. And so consists the huge discrepancy borne of wishful thinking and a culture desperately told that having more means you are more meaningful. I believe Bush quaintly called it "An Ownership Society" not long after he told us the patriotic thing to do was "go shopping" after 9/11.

In this environment, the market is not so much free as it open to the highest bidder, virtue and values not being a requirement. The resulting "market" is one jiggered by various narrow interests and by functions convinced through the lure of fees to go along with the asset inflation and reindeer gamers.

What Interests? Whose Functions? A bunch. Such as...

* Such as ordinary local home appraisers all the way up to big-ticket national debt ratings agencies like Moody's, Fitch, S&P and others. Some in the bag, some not, with the nots struggling against the tide.

* Such as regulatory agencies staffed at the executive level with anti-regulatory ideologues, believers in the virtues, and fantasy, of Free Market wisdom. Yes, political appointees, mostly conservative due to who's in the White House these 8 years, and almost all necessarily hewing the party line: HANDS OFF, whenever possible.

* Such as too clever by half Wall Street theorists known as quants delivering to their bosses new, arcane and faith-based methods to do what those CEO bosses are hired to do: Make lots of money for shareholders. That they were exotic and barely understood mattered not. At the end of a blackboard long equation, like that at right, was a big $ sign with several !s next to it. "Say no more Boys and Girls, make it so!" said the bosses.

• Such as mayors and building trades desiring two intertwined things: Jobs and building permits. Both public and private sector glommed onto the fact that all kinds of goodies bloomed from a structures-based boom comparable to the telco/internet booms of the 90s. Manufacturing had long since been packing up for destinations Latin and Asian. No jobs there. However, building retail shops and big boxes and homes and suburbs and all that 2nd and 3rd level economic activity that came with them was like a mirror of the 50's Levittown postwar surge. Manna from heaven for car dealers to Applebees' to Hollister.

* Lastly, such as homeowners themselves--also called Mortgage product consumers. Many had homes prior to this mess, homes with lots of equity. Some were newer homeowners--consumers--getting their piece of the dream thanks to newly 'friendly' bankers who before might have shooed them out of their office. Each of these crudely described demographics are part of the "Shopping as Patriotism" culture referenced above. For the 'house-rich", all that equity could be viewed as an ATM. HELOCs (Home Equity Lines of Credit) became that ATM device. Some got patios to add value to the underlying asset. Many bought plasma screens or took a cruise. This was obviously all well and good when, like Wall Street, they trusted that their ONE Dollar of investment was really worth FIVE today, because home prices were skyrocketing and that dollar in the not so distant future (so they were told, or wanted to believe) would be worth TWENTY in almost no time at all.

And then home prices in far flung suburbs got two successive shocks: 1. The housing market had climbed to saturation. Home Buyers--also known as Mortgage Customers--started by by 2005-6 to be harder to find. And when that happens, you do what? You dig closer to the bottom of the creditworthiness barrel to keep the graph moving up and to to the right. 2. Prices on hydrocarbon fuels started climbing--gasoline, to natural gas to heating oil. It cost more to get places from those newly built and bought houses. It cost more to get the materials to those building sites. Anything petroleum-based like plastics, cladding, vapor barriers and roofing started climbing. Hell, Tupperware was getting more expensive.

And the thing that stopped climbing was the dreamed of ONE to FIVE to TWENTY. The ATM didn't work anymore if it hadn't already been tapped out. Maybe this is obvious to readers and others. It seems, though, not so evident how it all fits together to many I speak with between 9 to 5. When credit card debt, another aspect of our recent fun-fest is added to the mix (how many apps in the mail have you gotten in the last 10 years? what's in your wallet?), well, it becomes easy to see how easy credit afflicted and addicted both the Titans of Wall Street and the merely mortal. Each has played fantastical games of head-in-sand in pursuit of the ultimate market bubble, one perfectly suited to an age of hyper-real experience-seeking and of lives lived virtually: Call it Unicornomics.

Q: How do you buy a unicorn? A: With imaginary money.
Q: How do you buy 2 unicorns? A: Declare the first unicorn and the rides you give as an asset and revenue stream for your CapitalOne card application.

That, unfunny as it is, for me, explains where we are. It doesn't make sense, but it didn't have to be so if people in positions of responsibility didn't abandon their integrity. Now those people want our help as taxpayers, because we have the only pockets collectively even close to deep enough to rescue them from their folly. Did we play along? Yes, we did. Did somebody wonder "where is all this easy money coming from?" Some did, some didn't, but very few buyers of those plasma screens or Palladian mini-mansions wanted to look a gift-unicorn in the mouth. And very few carpenters or lawn services or auto-detailers complained sincerely of too much business.

And it was fun, while it lasted, eh?

Well, this may suck, but it is time to pay. And because it sucks, in differing degrees and varieties, many refuse to step up without some clarity...

Joe on the Street thinks: This sucks because it's more of the same--free market, sink or swim for me, and parachutes, pontoon party boats and do-overs for those who claim to have the right stuff.

Doctrinaire Conservatives: This sucks because government sucks. It has to suck, and to be awful at everything or my reason for living and my guiding stars are gone. Sucks because we have no answers beyond more deregulation. And yes, even though it's a 40 Trillion unregulated Credit Derivatives shadow economy that's at fault here, more deregulation and reducing capital gains for exactly these players is the ONLY solution here.

Republicans: This sucks because Business guys are the Pros from Dover, right? They know and see all! Sucks because we've spent 20 years admiring and defending these Money Types and flying on their jets and playing golf with them and, dammit, they never once said what they did was sorta like my day job - making shit up and selling knee-jerk perceptions, not product.

And there we are. Fine Americans abused by the beatitudes of our tales of woe and wonder, each right and wrong.

But only one has the pull to do this thing.

As unjust as it seems, it IS time for taxpayers to come to the rescue. Because only they collectively can finance this fix of financial and political malpractice. To do it in a way that doesn't offend our sense of justice or capitalism. That means equity for bailouts. It means no pay for non-performance. It means reasonable rules replacing the fairy tales of deregulation that got us here. It means an explanation and an apology of some sort from somewhere and from some people who should have--and did--know better.

And even if that unlikely apology is forthcoming, for God's sake, exact righteous vengeance at the ballot box next month. But do it for reasons that will do you, do us all, some good. Know who's been selling you a bill of goods based upon a thing you know but were willing to overlook: There's no such thing as unicorns, or a free lunch. Ask why cops are seen, and encouraged, in a Farmers Market but virtually banished from our Credit Markets? Ask how government grows more, and also more useless-feckless, under "small government" boosters? Ask why your kids' bill for your choices, the national debt, has ballooned so ridiculously? Ask, are my ideas really sound when I rail against this party or that? Is tax and spend or borrow and spend the model you choose? Is law and order a thing for urbanites of various colors but something unnecessary for people wearing pinstripes and Rotary Club pins? Ask for useful explanations. And vote accordingly

If there is one thing that all of us need, it is explanations beyond spooky and cloudy requests for 700,000,000,000-plus checks.

Now is the time to explain this--Barney, Nancy, Harry, Hank, Ben, Warren, John, Barack, somebody--just as FDR did in his fireside chats weekly through the Great Depression to a bewildered and beat population.

As we have just seen, George W. Bush is woefully equipped to do the job.

That he is the first MBA president is both hysterically funny and metaphysically cruel.

And yes, God bless America. We're gonna need him.