In American politics there is a general consensus that government incompetence precipitated the financial meltdown. From the conservative perspective the lax oversight of government sponsored lending institutions Freddie Mac and Fannie Mae played a large role in expanding sub-prime mortgage lending that lit the torch of the housing bubble flame out. From a liberal perspective the nearly criminal lack of oversight of the financial industry by the agencies entrusted with this task is at the root of the cause. In all likelihood both views have merit and both share the common theme of government incompetence. The additional hand in this mess was the corporate and financial lobby machine that paid and duped lawmakers into believing the financial wild west was the way to prosperity.

These views help provide ideological ammunition for just about everyone but fail to grasp the larger picture. The U.S. government as a body is simply incapable of managing the growing complexity of the U.S. and global economy. This is best demonstrated, not by examining what happened in the yearlong run up the market implosion, but in the crucial days when the economy hung in the balance. It was during a critical three week span in September 2008 that the U.S. government proved its ineptness.

It may be unfair to single out one U.S. Senator as the culprit but Alabama Senator Richard Shelby is a prime representative of the congressional blundering that has spun the world into recession and taken trillions of dollars out of the savings of the American public. In the critical weekend of negotiations to save Wall Street investment firm Lehman Brothers it was Richard Shelby, minority leader of the Senate Banking Committee, that pressured Treasury Secretary Henry Paulson to solve the Lehman Brothers collapse without federal support. By Sunday night, September 14 it became obvious that this wouldn't happen and Shelby refused to allow a federally supported alternative. The following day Lehman Brothers filed for bankruptcy and the core of the financial industry began to collapse. Many economists look at the Lehman failure as the trigger point for what was to come.

Confronted with a similar situation just a day later, Shelby was overruled and the bailout of insurance giant AIG was okayed. Had AIG been allowed to collapse it is likely the world would be in a depression, not just a bad recession.

As AIG floundered it became obvious to anyone with economic or financial training that the U.S. financial system was just days from total collapse. The bailout plan was announced on September 19. It is now known that the $700 billion figure was just pulled out of thin air by Treasury Secretary Paulson in an attempt to stress how dire the situation had become. Unfortunately, it had the opposite effect on congressional Republicans who seemed to believe that since the figure was just made up the consequences must be exaggerated as well. Rather than act, they hesitated. Richard Shelby went on the air holding a letter signed by 230 economists who noted three primary flaws in the plan. Shelby acknowledged that he hadn't studied their objections, nor did he understand them. The economists objections alone were good enough for him.

While the letter made valid points about the proposed bailout legislation it said nothing about the consequences of not acting immediately. Shelby and his fellow congressional Republicans chose to accept the mild repercussions scenario spelled out by bill opponents and Fox News, which forecast negative consequences that were hardly as alarming as Paulson and Bernanke were predicting.

At the point where decisive action could have avoided a world financial meltdown, the congressional Republicans balked. Had they the ability to grasp what was occurring they may have put aside their ideological objections and acted post haste. Metaphorically, the ship was sinking quickly and they were arguing about the efficacy of saving the passengers if it meant saving a bad captain as well. During this week of ignorant politicking two of the nation's largest banks failed and a number of others teetered on the brink. Shelby stood his ground and in a single day the market lost $1.2 trillion of value. The $700 billion lifesaver wouldn't get passed until 14 days had elapsed. By this time, the world financial structure was reeling, coming to the conclusion that Washington was incapable of grasping the situation. Within a month the market would shed more than $8 trillion in value. While it is not certain that the speedy passage of the bailout bill would have prevented this loss, the foot dragging and back room politics ensured the meltdown and further intensified the recession.

It is probably true that Treasury Secretary Paulson, Federal Reserve Board Chairman Bernanke, S.E.C. Chairman Cox and others did not perceive the magnitude of the problem until it reached a critical stage. However; at that point they were willing to take decisive action. They were thwarted by members of Congress painfully incapable of seeing the big picture and completely out-of-touch with how the global economy now functions. It can certainly be argued that smart people got the nation into its current mess. However; it does not follow that ignorant ideologues can get it out.

The painful realization made clear by the 2008 financial crisis is that as the world economy grows more complex government oversight becomes less capable of regulating or even understanding the process. S.E.C. Chairman Christopher Cox has admitted to not fully understanding the derivatives market for credit nor its reach within the overall economy. It should not, then, be surprising that the S.E.C. failed to adequately govern the process. The complexity of the system is a problem not foreseen by governments nor does there appear to be any solutions at hand. The 1997 global financial crisis pushed the limits of governing bodies to the edge. In 1997 they thought they understood how financial "contagion" could spread globally and thought they had the knowledge and tools to keep on top of the global economy. The 2008 global financial crisis has demonstrated this is no longer the case.

When a political system has a person who's only training was law school in the pre-civil rights era deep South, determining the fate of the world economy, that system has some serious flaws. How he could be in a position to dictate banking policy for an economy that even the most brilliant economists barely understand is a testament to how badly the political system is structured. Now the $200 billion automotive industry finds its future being influenced by this career politician from Alabama. Whether this bailout is prudent or not, it is pretty clear those making the decision won't have a strong grasp of the issues. Good luck to Detroit. It is going to need it.