In the flurry of commentary and news reports about the economy this week, here is one point that I hope you didn't miss, from the Big Picture on Thursday:

As we learn this morning via Julie Satow of the NY Sun, special exemptions from the SEC are in large part responsible for the huge build up in financial sector leverage over the past 4 years -- as well as the massive current unwind

Satow interviews the above quoted former SEC director, and he spits out the blunt truth: The current excess leverage now unwinding was the result of a purposeful SEC exemption given to five firms.

You read that right -- the events of the past year are not a mere accident, but are the results of a conscious and willful SEC decision to allow these firms to legally violate existing net capital rules that, in the past 30 years, had limited broker dealers debt-to-net capital ratio to 12-to-1.

Instead, the 2004 exemption -- given only to 5 firms -- allowed them to lever up 30 and even 40 to 1.

Who were the five that received this special exemption? You won't be surprised to learn that they were Goldman, Merrill, Lehman, Bear Stearns, and Morgan Stanley. 

As Mr. Pickard points out that "The proof is in the pudding — three of the five broker-dealers have blown up."

So while the SEC runs around reinstating short selling rules, and clueless pension fund managers mindlessly point to the wrong issue, we learn that it was the SEC who was in large part responsible for the reckless leverage that led to the current crisis. 

You couldn't make this stuff up if you tried.

This point may be lost on the average voter, but it is firmly grasped by millions of the pro-business Republicans that John McCain needs to win the White House.

Add to that their disgust at the reckless and seemingly random government intervention in the markets, and you have the makings for a major backlash among a critical segment of the Republicans base this November.

It's no wonder McCain's post-convention bounce this week plummeted faster than the Dow on Monday. Bush has bankrupted this country -- the Republicans have wrecked America -- and the end result for the GOP is a coalition in complete tatters and disarray.

Funny what eight years of plundering by the masters of the universe will do to a country, eh?

Having returned a few days ago from nearly two weeks in Costa Rica -- pura vida, indeed -- I'm only now beginning to muster the interest in wading back into American news.

Traveling abroad has always been good for perspective on one's home country, of course, but in recent years the difference in tenor between life here in the States and elsewhere has grown noticeably more discordant.

As little as twelve years ago, you'd return from an extended trip abroad with the typical homesickness of the itinerant traveler: a new-found appreciation for the small familiarities of your native land, for the cleanliness of American streets and the friendliness of the American people.

With a few gifts for your friends and family, and the requisite jar of Nutella, you were usually glad to be home.

These days, the return is much more stark -- and it's not simply because one is returning home from a vacation.

There's no point in saying how terrible the American media is, how God-awfully tasteless the constant commercials for irritable bowel syndrome and erectile dysfunction and restless leg syndrome are, how bludgeoning the appeals to spend spend spend the money you don't have but still can borrow feel -- but when you first walk into an American airport after some time abroad, and face the full auditory assault of American television enfilading you from the widescreen TVs, it's clear (again) that whatever the television is saying or selling, it bears no real relation to actual life as it is lived by the vast majority of people in this world -- and you pledge, again, to stay as disconnected from that miserable electronic tether for as long you can.

And for a few days you do, until the echoes of another way of living and being start to dissipate into memory, and out of ill-formed habit you wander over to Atrios "just to see what is going on."

And there you find this:

Admiral Fallon is resigning as chief of Centcom sez CNN.

...ruh-roh:

Last December, when the National Intelligence Estimate downgraded the immediate nuclear threat from Iran, it seemed as if Fallon's caution was justified. But still, well-placed observers now say that it will come as no surprise if Fallon is relieved of his command before his time is up next spring, maybe as early as this summer, in favor of a commander the White House considers to be more pliable. If that were to happen, it may well mean that the president and vice-president intend to take military action against Iran before the end of this year and don't want a commander standing in their way.

Thanks for nothing, Atrios.

Atrios (via Americablog) points to a key observation by Jon Markman on the Bush administration's tactics to delay the coming recession:

So the government is in the process of twisting the arms of Federal Reserve Board members to lower interest rates by as much as 2 percentage points over the next year, including potentially a whopping half-point cut next week. That will allow banks to go back to one of their favorite recession-delaying ploys: encouraging debt-strapped consumers to refinance their loans at lower rates.

If that doesn't work, the government has been making noises about creating something like a Marshall Plan for home foreclosures -- a giant bailout fund similar to one used during previous housing crises. Just for good measure, analyst Bove notes, the administration is engaged in other types of powerful job-creating fiscal stimuli as well, such as ramping up spending on defense, infrastructure and transportation construction. "The administration in power is not going to go into an election year in a recession," he insists.

While Atrios notes that "[the] general independence - and belief in that independence - [of the Fed] is thought to be rather important," I think that's less of the story than the fact that lowering the Fed rates, like invading Iraq to stabilize the Middle East and other fantastic schemes of our beloved Bush administration, won't work.

Bernanke, after all, has already been spotted by gossip columnists throughout New York cavorting with investment bankers and Wall Street honchos, cooing "I'm your bitch" while throwing real cash from his fabled helicopters.

But the last time the Fed cut rates, mortgage rates rose as the market priced in the inevitable inflation that Bernanke's happy printing press would produce. Cutting rates will hasten the foreign exodus from U.S. financial instruments that has already caused the dollar to tank more than 11% against the Euro this year; and as that happens, interest rates will rise. Asian central banks, after all, have greater influence over long term interest rates in the U.S. than the Fed.

Which is to say that it's no surprise that a government that has spent the last seven years ripping out the firewall between partisanship and government at every level -- from oil leases on public lands to data mining on American citizens -- would be twisting the Fed's arm to cut rates. And fairy tales aside, we haven't had a Fed chairman with the independence to stand up to a President's pressure for a political bailout in more than twenty years. The Fed will probably cut rates at the behest of the Administration and Wall Street and the investment banks, but little George Bush had better hustle out quickly after they do to declare "Mission Accomplished." Because the relief that provides will last about one news cycle before the rest of the world rushes to dump more of their American assets, sending interest rates soaring.

It's quite amazing that when a President issues only his 4th veto in six and a half years, it doesn't even warrant a headline -- never mind a red font or a siren -- on Drudge.

But I guess that's in line with the marching orders:

The White House sought as little attention, with Bush casting his veto behind closed doors without any fanfare or news coverage. He was discussing it later Wednesday during a budget speech in Lancaster, Pa.

Zeus Y.:

Jim Cramer screams about his poor financial buddies going down. “Lower interest rates, Fed. I don’t want my rich decadent friends to face their due. They have FAMILIES for Christ sake.” So far the American people are refusing to play ball with this rigged game....

These so-called financial elites are so crass and intoxicated with the latitude granted them by their CEO President, it looks like they won’t even bother to rig a few calls in the game or penalize the other team (the American public) unfairly. At this point, it looks like that won’t be enough, they are so far behind. They’re simply going to try to change the score [through inflation and central bank bailouts]. If this happens, I have no idea what is going to happen. Will we just accept it? No October Surprise and Crash because a few trillion dollars are simply pumped into the system and the interest rates are lowered? Woo boy.

Why don’t they just get it over with and say, "We need about a half-trillion dollar bailout for our buddies, from you, the taxpayer. If you don’t pay up, you won’t be able to buy a house, we’ll fire your asses, spiking unemployment (because we would have to cut back on costs, naturally), and we’ll generally make your life miserable. Pay up if you want "protection." It is not a “decreasing appetite for risk” that is gumming up the works; it’s a system that has been set up to have no consequence, which touts the myth of a risk-free profit that is bringing things down. After all, what risk is there in giving out fraudulent loans and then passing them off as AAA rated mortgage-backed securities? I get the profit from transaction fees and sale of the mortgage securities. Some other sucker can take the shaft.

Oops you mean I also used my ill-gotten gains to lend out money to hedge funds (looking for big interest) which are now collapsing and won’t be able to pay me back, but, but, but... The cannibalism of elites can be very ugly, but they always end up coordinating in the end and turning their appetites on the American tax purse. Internalize profits, externalize liabilities. If you have the right men in government, you can even commit open and outright fraud and produce nasty, shoddy work as Halliburton did in Iraq, by the government’s own assessment, and still get a quarter-billion dollar bonus. “Heckuva job ______ (fill in the blank). You’re one of us."

All the while that same taxpayer now has extreme strictures placed upon his or her ability to file bankruptcy and come out with a clean slate, even though two-thirds of bankruptcies are the result of real emergencies (failing health, lost job, or divorce), not the fabricated ones of the finance industry. The simultaneous mendacity, contempt, and dependence toward the American citizen is a force to behold. I think the best way we may have of calling their bluff, is simply saying, "no bailout". They have to take the pain even if that means pain for us. As a follow-up I think we should get real practical and creative about creating our own circle lending, our own markets (as with farmers markets, etc.) that cut out these non-productive, and indeed, life-draining, parasites. In the words that they not doubt use to condemn the homeless they pass on the way to their high-priced pseudo-profession. "Get a job, a real job!"

Tony Snow, today:

"Now we have a situation where there is an attempt to do something that's never been done in American history, which is to assail the concept of executive privilege which hails back to the administration of George Washington and in particular to use criminal contempt charges against the White House chief of staff and the White House legal counsel," said White House Spokesman Tony Snow.

Perhaps no White House chief of staff and no White House legal counsel have ever faced contempt of congress charges simply because never before in American history have the chief of staff and the legal counsel been so contemptuous of congress or the constitution.

As to "assailing the concept of executive privilege" -- also known as checks and balances -- Booman reminds us:

The last time a full chamber of Congress voted on a contempt citation was 1983. The House voted 413-0 to cite former Environmental Protection Agency official Rita Lavelle for contempt of Congress for refusing to appear before a House committee.

Booman goes on:

This demonstrates an appalling erosion of principle among GOP lawmakers. Ronald Reagan was not only a Republican president, unlike Bush he was a popular president. Nevertheless, in 1983, not a single Republican member of congress was willing to let him stonewall a congressional committee. Today, not a single Republican on the Judiciary Committee was willing to say the same.

What happened in the interim?

What happened indeed?

At long last, have they no shame? (Er, that's obviously rhetorical):

The White House has refused to give Congress documents about the death of former NFL player Pat Tillman, with White House counsel Fred Fielding saying that certain papers relating to discussion of the friendly-fire shooting “implicate Executive Branch confidentiality interests.”

Reps. Henry Waxman, D-Calif., and Tom Davis R-Va., the leading members of the House Committee on Oversight and Government Reform, objected to the refusal Friday in letters to the White House and the Defense Department.

White House and Pentagon officials have turned over about 10,000 pages of material, but Waxman and Davis said those papers lack critical documents that would show communications between senior administration officials and top military officers shortly after Tillman was killed in Afghanistan in 2004.

Forget for a moment how specious the legal argument or how craven the implications, and ask yourself: at what point (and over whom) will the Congress stand up to this administration's continuous flaunting of legislative oversight? Taylor? Miers? Tillman? Gonzales? And what more will it take than an administration claiming executive privilege over the release of a soldier's records before the Congress finally stands up and says, Enough?

Maybe those questions are rhetorical, too.

Greenwald gets it right:

Washington Post National Political Reporter Shailagh Murray opined on Monday:

Washington: What can possibly be gained by congressional hearings into the Libby commutation? Clearly Bush had the authority to do this, and he did it. Q.E.D. I'm old enough to remember when President Ford appeared before a congressional committee to explain his pardon of Richard Nixon. But Bush is no Ford, and unlike the Ford pardon, I don't think this action is going to look better over time.

Shailagh Murray: YAAWWN. That's my view of the Libby flap. What on earth did people expect Bush to do?

YAAWWN. What could possibly be more boring or irrelevant than the President of the United States protecting one of his most powerful aides, now a convicted felon, from going to prison, thereby ensuring that that aide has no incentive to disclose what he knows? Can we get back to what really matters to Americans, like John Edwards' haircut and probing investigations of his stylist?

From the latest USA Today/Gallup Poll:

5. From what you have heard or read, do you think President Bush was right to commute Libby's sentence, do you think he should have gone further and granted him a full pardon, or do you think he should not have intervened at all on Libby's behalf?

Right to commute sentence - 13%

Should have granted full pardon - 6%

Should not have intervened at all - 66%

No opinion - 15%

As usual, the true "fringe" in our country are Bush followers and their establishment media allies.

Matt Singer reminds me of a good laugh from the 2004 archives of The Onion, which still rings true:

WASHINGTON, DC—According to a study released Monday by the Hammond Political Research Group, many of the nation's liberals are suffering from a vastly diminished sense of outrage.

"With so many right-wing shams to choose from, it's simply too daunting for the average, left-leaning citizen to maintain a sense of anger," said Rachel Neas, the study's director. "By our estimation, roughly 70 percent of liberals are experiencing some degree of lethargy resulting from a glut of civil-liberties abuses, education funding cuts, and exorbitant military expenditures."

San Francisco's Arthur Flauman is one liberal who has chosen to take a hiatus from his seething rage over Bush Administration policies.

"Every day, my friends send me e-mails exposing Bush's corrupt environmental policies," said Flauman, a member of both the Green Party and the Sierra Club. "I used to spend close to an hour following all the links, and I'd be shocked and outraged by the irreversible damage being done to our land. At some point, though, I got annoyed with the demanding tone of the e-mails. The Clear Skies Initiative is bogus, but I'm not going to forward a six-page e-mail to all my friends—especially one written by a man who signs his name 'Leaf.' Now, if a message's subject line contains the word 'Bush,' it goes straight into the trash."

Stoller makes a very cogent point about America's historic role -- and Bush's declining role -- in world affairs:

Much of what America did in international affairs prior to the Bush Presidency was to act as sort of buoy, or a neutral third party in negotiations, a bulwark that other nations could broadly trust. America didn't always keep its word, and it wasn't always a perfectly done role, but there really was no alternative. And I think what the Iraq war has shown is that the alternative really is total chaos, and that means that America can reclaim a leading role in global affairs if we begin to rebuild our credibility. Because of Iran's recent bad behavior, nations around the world want to see us reclaim that role, though with more checks on our range of action.

Bush, aside from the ability to start new wars, is largely irrelevant to that goal. Most Presidents find their influence waning in the final two years, but with Bush, it seems like that decline will be larger than usual. Bush lies almost constantly, except when he doesn't know what he's talking about and says something nonsensical. Domestically and internationally, that means it's useful to try to ignore him as much as possible and do business with the people that will be in charge when he's gone. Pelosi, in going to Syria, and in telling Bush to calm down, is looking much more like a President than Bush is. Bush is even having his role as commander-in-chief challenged, by both his own ineptitude and the public's willingness to strip him of power. By default, that power is slowly bleeding over to Pelosi, Reid, and whichever member of Congress is leading that day and filling the massive void Bush has left. This is not an ideal scenario, but it's the one that Bush set himself up for when he refused to acknowledge the results of the 2006 elections and what that meant for his method of governance.

He may hold the constitutional office, but he is less and less the President every day.