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Neither candidate has correct answers

Three debates into the financial crisis the nation faces, the worst financial challenge since the Great Depression, and one thing has become abundantly clear … no one has the solution to the crisis.

Neither of our candidates has anything resembling a broad-based solution that will work and will save the markets and our homes. It is a sobering thought.

Perhaps it is time for us to acknowledge that, in a very complex world, we may not have tidy solutions to the problems we face. The solution to the financial crisis probably lies in flexibility and rapid response, not traits our government has been known for in the past, but functions that may have to exist to protect us from a long and hard recession. Governments around the world will have to try solutions and see what happens and adjust as events unfold. It is a postmodern moment.

We found ourselves in this position for a variety of reasons, but none more difficult to accept is that we have been robbed, and it was an inside job. Because big business gets more concessions from the federal government than you or I, because of their cash influence, and because of a philosophy of under-regulation, the nation let the fox manage security in the hen house.

Deriva-tives are insurance products, used to guarantee questionable securities that conservative bankers and investment houses would not have purchased without protection. But derivatives were not called insurance, because if they were insurance there would have had to have been financial reserves established to guarantee the policy. So these “investments” guaranteed terrible home loans and other bad investments, and offered the guarantees as nothing more than bets, gambles for very high stakes.

This would not be any different than you or I deciding to issue insurance against a $3 billion package of bad loans. We just charge the buyer say 10 percent of the investment, $300 million, and promise to cover the investor if the loans go bad. The investor has protection (in theory) and you and I make a ton of money by doing, well, nothing really, because we have no cash to back our guarantee.

When the bad loans went bad, the investors called us and asked for their money … and that is when the investment banks found out that the derivatives were all smoke and mirrors. Then came the collapse of the entire house of cards and the realization that our banking system had no foundation. It was an inside job all right, and the derivatives managers took all the money and kept it.

Oh, and just so you know, they worked out a deal with Congress that their millions in income were taxed at 15 percent, only a little more than half of your tax rate.

Don’t you think that regulations here might have helped more than just a little?

It is not a new problem. In a new book on the Titanic researchers found that the builders of the boat intentionally used thinner steel and weaker rivets than needed, based upon obsolete specifications for smaller ships. They also sailed with far too few lifeboats, because there were no regulations that were current at that time requiring them to actually have a seat for every passenger on the lifeboats. When the ship sank, its owners and builders claimed it was built to regulations, in order to avoid liability.

Apparently the descendents of these owners and builders moved into the financial markets where they made a new version of the Titanic. And we sailed all over again.