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Excellent commentary from Chris Whalen on the Dylan Ratigan Show. (For those who prefer Fox News flavor, he makes appearances there, too).

Whalen doesn’t get near the publicity I think he should, and if history has taught us anything, short term pain (via bankruptcy, company buyouts at a stock value of 50 cents, etc.) can be a positive thing long term by clearing out the necrotic and gangrenous entities poisoning the host.

Such last ditch efforts are especially healthy when you hang your hat on a growth obsessed dependent economy.

Highlights:

All of these [financial] vehicles — asset backed securities, mortgage backed securities, structured investment vehicles — this was Wall Street’s, and really America’s way, of getting access to even more credit (household borrowing) than the banking system could support. Now, it’s all collapsing on itself. That’s where the Federal Reserve came in to manage deflation, and to backstop the debt.

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The Federal Reserve was setup to help the real economy when Wall Street periodically destroyed itself. The Fed is now there to support the speculators, and let the real economy to go to Hell.

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Until you restructure [the banks], you’re not going to grow. You can’t provide new credit to the real economy. You can’t grow jobs, because these banks have to shrink. Nothing has changed [with Wall Street, regulations, politically, etc.]. It’s just gotten worse.

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Republicans were trying to incrementally boost the economy with tax cuts, but they don’t want to address the real issue – which is spending. If they’re not going to cut back the size of the state.

Even going back to Reagan, I was a great supporter of Ronald Reagan, but they didn’t do the work. They cut the taxes, but they did nothing to slow down spending. They did the easy thing politically - spend more and lower taxes.

Bravo sir!