Nearly a year ago, on October 30th, 2007, I first began petitioning Congress with the following message (among others):

"Congress MUST NOT bail out – under any circumstances – mortgage companies and investors who voluntarily entered into risky mortgage and derivative contracts during these last several years due to lax lending standards, poor due diligence or as a matter of business policy. Failure must be allowed irrespective of the damage done to these firms, because only financial failure serves as an effective check and balance against excessively risky behavior and greed. The practice of intentionally making problems “really big” in the smug knowledge that you can take ill-gotten profits and lay off the risk on society has led to a series of economic disasters that have been “charged off” on the American Taxpayer, going back to the S&L Crisis.

Congress must act to ban all off-balance-sheet “conduits”, SIVs and similar schemes, and require that any and all liabilities be properly and completely reported both to regulators and shareholders. These vehicles create an intentionally-false view of firms’ financial condition. In effect, these vehicles serve to fraudulently manipulate a bank’s balance sheet by hiding debt. These are the same accounting tricks that were instrumental in Enron’s bankruptcy. Now, on the front page of the Wall Street Journal (October 13th) we learn that Secretary Paulson is actively involved in attempting to expand this deception! "

Since then we have seen multiple petitions, all of which are chronicled at SupportedTheBailout.Org, and all of which have been largely ignored.

It is willful ignorance of these petitions that leads us to being where we are in this economic crisis.

It is willful ignorance of the facts that has caused your 401k and IRA balances to decline by nearly forty percent, lending to constrict the point that we are threatened with another Depression, and unemployment to skyrocket.

Ben Bernanke claims to be a student of The Depression and has written a thesis paper on it - one that I have read, and, in my opinion, have found to be indefensible.  Of course when your defense is heard by a bunch of monetarists who believe that "the answer to all crunches in liquidity is more liquidity", you pass.  Such is the ivory tower world, which unfortunately is rather disconnected from the world that those who must "do" in order to survive (instead of "teach") live in.

But Anna Schwartz is no ordinary economist.  Nor is she an ordinary student of The Depression. 

She, at 92, is one of the few people who actually lived through it and remembers what it was like, never mind quite possibly knowing more about monetary history, theory and the actual practice of banking than anyone alive.

She is co-author (along with Milton Friedman) of the 888-page tome "Monetary History", a book that Ben Bernanke himself has said is "the leading and most persuasive explanation of the worst economic disaster in American History."

And today, in The Wall Street Journal, she calls a spade..... a spade.

Let's use her words, of course, attributed:

"We now hear almost every day that banks will not lend to each other, or will do so only at punitive interest rates. Credit spreads -- the difference between what it costs the government to borrow and what private-sector borrowers must pay -- are at historic highs.

This is not due to a lack of money available to lend, Ms. Schwartz says, but to a lack of faith in the ability of borrowers to repay their debts. "The Fed," she argues, "has gone about as if the problem is a shortage of liquidity. That is not the basic problem. The basic problem for the markets is that [uncertainty] that the balance sheets of financial firms are credible."

So even though the Fed has flooded the credit markets with cash, spreads haven't budged because banks don't know who is still solvent and who is not. This uncertainty, says Ms. Schwartz, is "the basic problem in the credit market. Lending freezes up when lenders are uncertain that would-be borrowers have the resources to repay them. So to assume that the whole problem is inadequate liquidity bypasses the real issue."

Of course it does.  That bypass is intentional Ms. Schwartz.  It is an outrageous and in fact insane attempt to protect those who have made bad bets from the proper outcome of those wagers. 

That protection stems from the fact that both of the main protagonists in "addressing the issue", Chairman Bernanke and Secretary Paulson, in fact were prime architects in causing the problem in the first place.

Chairman Bernanke was on The Federal Reserve Board during the Greenspan years, when Alan Greenspan "pumped liquidity" after 9/11 and the Tech Wreck, yet at the same time removed essentially all regulation and oversight from the banking sector.  He is thus complicit in the generation of the credit bubble that led to this disaster, and to take strong action against the perpetrators of same he would both have to admit that he in fact was one of the prime causative factors in the mess and would be forced to resign in disgrace.

Secretary Paulson is in an even worse situation - he, as Chairman of Goldman Sachs, testified in Congress as far back as the year 2000 that Investment Banks should have the shackles of leverage restraint removed from them.  He failed to get that from Arthur Levitt in 2000 (President Clinton's chair of the SEC) but came back to the well in 2004 under President Bush and was successful.  Two years later, having used that expansion of leverage to garner a personal fortune of $500 million dollars, he cashed out tax-free to take his seat as Treasury Secretary.

Every one of the large firms that has failed - all five (Fannie, Freddie, AIG, Lehman and Bear Stearns) - would still be in operation today if their leverage had been held at the pre-2004 12:1 limit.  Therefore, Secretary Paulson must accept personal responsibility for the decisions that led to the failure of these firms, as he was one of the primary individuals in American Business who argued for removal of these constraints.

As for Anna's view on what should be done now, I again quote the esteemed (and unimpeachable) expert:

"Rather, "firms that made wrong decisions should fail," she says bluntly. "You shouldn't rescue them. And once that's established as a principle, I think the market recognizes that it makes sense. Everything works much better when wrong decisions are punished and good decisions make you rich." The trouble is, "that's not the way the world has been going in recent years."

Instead, we've been hearing for most of the past year about "systemic risk" -- the notion that allowing one firm to fail will cause a cascade that will take down otherwise healthy companies in its wake.

Ms. Schwartz doesn't buy it. "It's very easy when you're a market participant," she notes with a smile, "to claim that you shouldn't shut down a firm that's in really bad straits because everybody else who has lent to it will be injured. Well, if they lent to a firm that they knew was pretty rocky, that's their responsibility. And if they have to be denied repayment of their loans, well, they wished it on themselves. The [government] doesn't have to save them, just as it didn't save the stockholders and the employees of Bear Stearns. Why should they be worried about the creditors? Creditors are no more worthy of being rescued than ordinary people, who are really innocent of what's been going on."

Exactly.  Thank you Ms. Schwartz for adding the imprimatur of an unimpeachable expert, perhaps the most credible expert on monetary and banking policy alive, to the view that I and a few others have been shouting to Congress and others over the last year.

And the root cause?

"How did we get into this mess in the first place? As in the 1920s, the current "disturbance" started with a "mania." But manias always have a cause. "If you investigate individually the manias that the market has so dubbed over the years, in every case, it was expansive monetary policy that generated the boom in an asset.

"The particular asset varied from one boom to another. But the basic underlying propagator was too-easy monetary policy and too-low interest rates that induced ordinary people to say, well, it's so cheap to acquire whatever is the object of desire in an asset boom, and go ahead and acquire that object. And then of course if monetary policy tightens, the boom collapses.""

Uh, yeah.

And now Congress has turned to those who were responsible for creation of the mess and believes that their tonic for cleaning it up will be effective.

The simple fact of the matter is that Congress has made a critical error in allowing Ben Bernanke and Hank Paulson to oversee this mess and its resolution.  Both men are hopelessly compromised in that taking true, effective action would require both to admit to their complicity in the creation of the bubble in the first place, and in Secretary Paulson's case it would involve the admission that his personal fortune was gained through the unwise and imprudent advocacy of the very policies that led to the collapse now upon us.

Neither of these men are going to admit any such thing, for doing so would likely lead to immediate removal from office at best. Indeed, now that they have undertaken the extreme measures that have been practiced to cover up the original event and its causes, protecting those who were complicit, they might even come under federal indictment for racketeering should they come clean and tell the truth.

It is, however, the job of Congress to put a stop to such outrages before these two men, in cohorts with their friends in the banking system, lead us straight into The Greater Depression. 

Indeed, history has shown that when The Executive oversteps its boundaries, or when other elements of the government do so, that Congress is the body retaining not only the authority but the requirement to act in a fashion that protects the body politic. 

In this case, that protection is urgently needed, as in "today".  Secretary Paulson and Ben Bernanke's pursuit of policies that are harmful has now gone on for more than a year, and should this be allowed to continue, irrespective of who holds the title in the office, we will see the destruction of financial firms and American Sovereignty piece-by-piece until what remains is unable to be saved at all.

I close with a final quote from The Wall Street Journal interview:

"Fed Chairman Ben Bernanke, of all people, should understand this, Ms. Schwartz says. In 2002, Mr. Bernanke, then a Federal Reserve Board governor, said in a speech in honor of Mr. Friedman's 90th birthday, "I would like to say to Milton and Anna: Regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do it again.""

Ben Bernanke (and Secretary Paulson) not only will do it again, he has done it again - unless Congress acts here and now to stop him.

The Genesis Plan is one such way to stop him.