A tremendously hot August that flirted with record highs is almost history and with it the tendentious hope some had for a Summer of Recovery. Au revoir. Boasts that emanated from the White House of an imminent reversal of America’s dismal economic predicament (and Democratic political fortunes) were so predictably wide of the mark that the reluctant acknowledgment of such is almost uncontroversial. One must understand that when a president is this out of his depth, what other recourse is there besides breaking out the Blue Goose to disseminate false hope?

A woeful chasm in this country persists and it sets the Best and the Brightest of our venerable institutions diametrically apart from the economic reality on the ground. This Recovery Summer that decidedly wasn’t brings to mind the “green shoots” we heard a bit about in the spring of 2009. Or perhaps more notoriously, reminds us of how wrong the establishment was in its belated discovery of economic recession 2½ years ago. If their epic wrongness continues unabated, words like “expert” may literally have to undergo semantic change. “A person who commands considerable status despite lack of foresight, special knowledge or self-awareness,” is what Webster’s Fourth may read at the turn of the next century.

Optimistic talk of liberal policy wonks—who else is there left to defend this administration?—is given the lie to by NPR a day ago.

Articles like these make pearl-clutchers out of us all:

[I]n light of the financial crisis and Fannie and Freddie's near-collapse, policy leaders are also rethinking the government's role — and many Americans are starting to question whether homeownership is the only path to the American Dream.

Fannie and Freddie function by buying, bundling and then stamping a government guarantee on mortgages. Then they sell them to investors. It keeps the banks happy because it keeps capital flowing, and it keeps consumers happy because it makes low, fixed-rate mortgages possible.

In a related occurrence, Rep. Barney Frank, chairman of the Financial Services Committee, finally lent his lisp to an astonishing truism: “Not everybody can or should be a homeowner,” the congressman informs us, summoning the authority of a public official oblivious to how tragically late he is.

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Peter Goodman of the New York Times writes a stinging takedown of the Obama administration’s $75 billion program to protect homeowners from foreclosure.

Since President Obama announced the program in February, it has lowered mortgage payments on a trial basis for hundreds of thousands of people but has largely failed to provide permanent relief. Critics increasingly argue that the program, Making Home Affordable, has raised false hopes among people who simply cannot afford their homes.

As a result, desperate homeowners have sent payments to banks in often-futile efforts to keep their homes, which some see as wasting dollars they could have saved in preparation for moving to cheaper rental residences. Some borrowers have seen their credit tarnished while falsely assuming that loan modifications involved no negative reports to credit agencies.

Some experts argue the program has impeded economic recovery by delaying a wrenching yet cleansing process through which borrowers give up unaffordable homes and banks fully reckon with their disastrous bets on real estate, enabling money to flow more freely through the financial system.

"The choice we appear to be making is trying to modify our way out of this, which has the effect of lengthening the crisis," said Kevin Katari, managing member of Watershed Asset Management, a San Francisco-based hedge fund. "We have simply slowed the foreclosure pipeline, with people staying in houses they are ultimately not going to be able to afford anyway."

Mr. Katari contends that banks have been using temporary loan modifications under the Obama plan as justification to avoid an honest accounting of the mortgage losses still on their books. Only after banks are forced to acknowledge losses and the real estate market absorbs a now pent-up surge of foreclosed properties will housing prices drop to levels at which enough Americans can afford to buy, he argues.

Over at Naked Capitalism, they think that the "pointed mainstream media coverage of the Administration’s limp wristed, industry-favoring financial 'reform' plans" is long overdue. Yves Smith finds that "object lesson of the day is Peter Goodman’s story at the New York Times on the Treasury’s mortgage mod program, which was old Bush/Paulson wine in new bottles."

Congress, both the House and the Senate, seems poised to enact "Wall Stree Bail-out" legislation.  This is good news.  If you want to buy a new car, if you want to buy a new home, if you're saving for your child's education, if you're saving for your retirement, this is good news.  

Without a bailout plan, the credit markets freeze!  We are now hearing about the fear financial firms have in making loans.  They are hesitant to  provide financing to eachother, and they are hesitant to provide financing to you and me.  We are hearing about the credit freeze because Congress has realized it must explain to us why this legislation is important for us.

When "Wall Street Bail-out" legislation passes, what will happen next?

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The recent rash of institutional failures plaguing Wall St. has made big headlines and will only serve to reinforce the dominance of economic issues on the campaign trail.  But these high-profile financial diasasters actually obscure a more dramatic development in the economy that is leaving Republicans panicked and speechless with nowhere to turn.  The Republicans would be in deep, existential trouble on the economy even if the major lending institutions were still doing just fine.

The bigger problem for Republicans is that the very way they measure the health of an economy is going the way of the dodo.  What terrifies them (and what should terrify you) is that the economy we live in today (minus recent spectacular failures) is the economy they created by design, partially to win votes. No, I'm not kidding.

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Cross-posted from The Wayward Episcopalian.

Honor and ethics are very important to me. As I wrote on my personal blog earlier this week, the Gospel shows us that few things are more immoral than the abuse of power. When corruption scandals beset DC, I am usually very swift to condemn the accused, even if they are members of my own party - case in point, while in New Orleans, I volunteered for Karen Carter's 2006 midterm campaign to unseat Rep. William "Dollar Bill" Jefferson (D-Refrigerator).

Sometimes, however, ethics scandals are just a bunch of trumped-up hooey designed to generate headlines no matter what the personal cost, and that's exactly what we see unfolding today. The protestors, bloggers, and GOP aides trying to smear Senators Chris Dodd and Kent Conrad right now should be ashamed. Dodd and Conrad are two of the most honorable people in Washington, DC, and I do not for an instant believe either one knowingly or purposefully did anything wrong. This is especially true of Conrad, who has been a model of honesty in the way he has handled this scandal.

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