It's Friday Night! Party Time!   Time to relax, put your feet up on the couch, lay back, and watch some detailed videos on economic policy!

I'm in a fairly foul mood about what is going on with Obama policy despite so many shouting from the roof tops this is not what they voted for...

So, I thought a stroll down history lane on how while WWII raged on U.S. and British banks were doing business with Hitler was in order to set the tone.

On another blog I responded to a challenge to describe an alternative to the approach Obama has chosen with Larry Summers and William Geithner. What I said there (with a little modification and expansion) is worth repeating here:

1. (After firing Summers and Geithner,) I would appoint Kansas City Fed Chief Tom Hoenig, who said that the "too big to fail" doctrine was a failure, as Chief Economic Advisor; and UMB President William Koenig, whose bank was well managed, avoided toxic debt instruments, and turned down Tarp money, as Secretary of the Treasury.

2. I would charge them to implement an FDIC/RTC style receivership plan immediately, to rid the banking system of toxic assets.

Securitization was based on the premise that a “fool was born every minute.” - Joseph Stiglitz in congressional testimony, Financial Regulation, October 21, 2008.

Even Adam Smith recognized that unregulated markets will try to restrict competition, and
without strong competition markets will not be efficient. More recent research has shown that
markets often fail to produce efficient outcomes (let alone fair or socially just outcomes) when
information is imperfect or asymmetric—but information imperfections and asymmetries are at
the center of financial markets. That is what they are about. Our financial markets have even
worked hard to exacerbate these problems; as we have noted, they created non-transparent
products that were so complex that not even those who created them fully understood the risks to
which they gave rise.

The headlines are ablaze of Geithner's plan.   The Treasury Secretary is on CNBC, the cable news, even conference calls with select bloggers (I wonder if Krugman was invited?), are they twittering too?   The markets react, the Dow up almost 500 pts!   Astounding, magical, we have the cure....or do we?

I already wrote my own overview of the toxic asset plan and believe it fatally flawed with the same assumptions that got us into this mess, home values must drop to be in alignment with income and Americans are tapped out, the great debt fueled Ponzi scheme has collapsed.

On June 24, 1982, four bank examiners from the Federal Reserve Bank of Kansas City walked into the rear of a small shopping mall in Oklahoma City.
This unlikely location marks the start of a series of events that have brought us to the brink of a global economic collapse and a second Great Depression.

In order to reform the broken financial system you must first come to terms with the fundamental reasons for the current dysfunction. To do that we must go all the way back to the first instance that this dysfunction manifested itself, in the same way that a medical researcher must trace a mutating virus back to its origin in order to find a vaccine.