Finance is a highly esoteric field of which most are willingly incurious. So now that the financial sector, and thus the whole economy, is in deep trouble, it is simply stunning how many suddenly know who to blame and what went wrong; George W. Bush and deregulation, of course. Do not stop there; next go after John McCain and his adviser Phil Gramm over the Gramm-Leach-Bliley Act of 1999. Just another example of Republicans allowing wealthy bankers to satiate their greed at the expense of American taxpayers. Could this have simply been a massive systemic breakdown for which all parties bear some blame? Heavens no, perish the thought. Simple villains are always sought in trying times. The latest episode is no different. The gift of hindsight has apparently vindicated the argument that âÄúBushâÄôsâÄù deregulation is the culprit of this morass. How is that conclusion reached? Well, through a most stunning use of logical analysis. Start by making a massive assumption about a key variable, hold everything else constant, and finally, start drawing conclusions. As another parameter to this thought exercise, please ignore the fact that hedge funds, more lightly regulated than banks, are fairing this crisis much better. To conclude, speak of regulation as a vague moral uplift to avoid exposing oneself to technical critique. A lack of regulation is not to blame for this crisis. The root of it all goes back to a bubble in the housing market, fuelled by cheap credit for home buying and the penchant to in turn use that house for borrowing more money. The factors influencing this are as numerous as they are multi-faceted. Calls for âÄúsmartâÄù regulation suffer from a logical fallacy. To become smart, first one has to learn. How can regulators know how to prevent a future crisis in a dynamic industry? Blaming financial derivatives, specifically credit-default swaps, is tantamount to blaming the symptom for the disease. Graham-Leach-Bliley was enacted in 1999. Financial securitization came to be in the 1970s. Did these instruments suddenly wreck the finance world after being benign for three decades? Fannie Mae and Freddie Mac, two mortgage giants who collapsed recently, owned 80 percent of American mortgages, and actually quasi-government agencies, not fully privatized. Their reckless lending was fuelled by what was essentially a government guarantee of their debt. And when Bush and other Republicans tried to put some teeth on their regulator in 2003, it was Democrats who blocked it. Indeed, much has gone wrong in the last two weeks and it is difficult to digest it all. New information from insiders suggests that late last week the American financial sector came as close as it ever has to completely collapsing, a truly terrifying scenario. Wall Street is but a part of the economy, that is true, but it is the brain. There is not a sector in the economy that does not depend on it in a great way. A Princeton economist has compared the situation on Wall Street to yelling fire in a crowded theater. âÄúEverybody is rushing to the door. You are rushing to the door because everyone is rushing to the door.âÄù There is no denying that the government had to act. Unfortunately, too many construe this to be simply âÄúbailing outâÄù the fat cats and footing taxpayers the bill. That greatly oversimplifies things. For one, the government is certainly taking on liabilities, but Wall Street is not winning either. Fannie and Freddie were not bailed out, for example, they were nationalized. That means that everyone in the company was wiped out and left nothing. For another, âÄútaxpayersâÄù are not some homogenous group. Democrats would have you believe that every taxpayer is a single mother who is about to lose their house. These âÄúfat catsâÄù on Wall Street pay roughly a quarter of all U.S. tax revenue, so they are taxpayers too. Teachers, construction workers, and government employees also have savings and benefits in markets that would be lost without a government rescue. This crisis is not a refutation of the âÄúfree marketâÄù by any means, either. America still has a lot of regulation, and the presence of the Federal Reserve basically nullifies the argument completely. Those who take that stance simply let their anti-capitalist prejudices show without restraint. There is no preferred or guaranteed outcome, because everyone will lose. The entire nation will have to pick up this mess, but the entire nation also enjoyed the boom that led to it. Make no excuses for irresponsible Wall Street brokers, but make none for the homeowner who could not pay what he borrowed either. If issue is to be taken with the Bush administration, the proposed bailout deserves it. There is much to criticize about it. But simply demanding that the president should have been omniscient identifying a scapegoat, nothing more. Not one clear action that he could have done can be defined. Some pundits have stated that there does not need to be a real reason behind blaming this crisis on Bush, because people want to believe it. How mature. For St. JamesâÄô StreetâÄôs column last week, we were called âÄúObamunnistsâÄù (a label so adorably childish we want it in crayon). For defending capitalism, we will be hugely disappointed if we are not called âÄúwingnutsâÄù or some other generic anti-Republican cliché. Balance is needed, after all. Ideological advancement is not a concern of this column. Slicing through partisan nonsense to get to the heart of issues is. If calling for reasoned conversation over this crisis means we actually have to come to the defense of an administration we would otherwise deride, then so be it. Those at St. JamesâÄô Street welcome comments at [email protected] .