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Commentary: Financial meltdown is an absolute disaster

  • Story Highlights
  • Glenn Beck: In February, people thought I was alarmist for seeing trouble ahead
  • Economist Roubini foresaw credit woes that are slamming Wall Street, Beck says
  • Beck: Crisis has progressed to a very severe stage
  • The bailout plan is risky, but it's the only solution out there now, Beck says
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By Glenn Beck
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Editor's note: Glenn Beck is on CNN Headline News nightly at 7 and 9 ET and also is host of a conservative national radio talk show.

Glenn Beck

Glenn Beck says the financial crisis has become severe and a solution is needed right away.

NEW YORK (CNN) -- When I see something on the horizon that I consider serious, all I can do is dive in and do as much homework as my brain can possibly handle.

Then, after I digest the information, I look around for the smartest people I can find and talk to them. And then I e-mail them.

Then I call them at home during their child's fourth birthday party. This is why there's not a long line of people gathering to be my friend (among other things).

Doing my homework and then listening to the best brains from both sides of an issue allows me to crystallize my opinions better than any other method I've tried.

When I first started to truly understand the economy, one of the smartest people I began speaking to was Nouriel Roubini, chairman of RGE Monitor and professor of economics at New York University's Stern School of Business.

Right here on, after sifting through all of Roubini's "smart guy" language, I attempted to boil down the five levels of economic disaster that we could be facing. Like our military's DEFCON (a one-to-five scale, with one being the most serious), the "DEFCONOMY scale" has been eerily prescient so far. And believe me, this isn't a set of predictions that either Mr. Roubini or I wanted to turn out to be correct.

Back in February when the column was published, I was being called crazy for being too pessimistic. I had become a bit of a dark cloud to be around. No one wants to grab lunch with the guy constantly whining about the sky falling, especially when things seemed to be going generally well.

At the time, most people weren't even sure we were on the DEFCONOMY scale at all. Now, we've clearly raced passed DEFCONOMY 5, 4, and likely 3 as well.

Look at the description of DEFCONOMY 3:

"Some banks begin to crack under the pressure of continuing write-downs and mounting defaults by consumers. A national or large regional bank finally collapses, triggering hedge fund failures and general chaos on Wall Street, potentially leading to a 1987-style market crash.

Odds we get here: Very good. Roubini says that we'll likely socialize the losses, "effectively nationalizing the mortgages or the banks."

Any of that sound familiar? The Wall Street Journal reported that last week, "the market for mortgage-backed securities disappeared" and that the "financial system was behaving like a patient losing blood pressure."

As we threaten to cross into DEFCONOMY 2, the government rushed to bring us into the current bailout debate and stop the bleeding. But it may be too late -- my gut tells me we're already in Defconomy 2, and if true -- the transition to Defconomy 1 may be far quicker than many expect. To show how serious of a situation we are in, Defconomy 1 on Roubini's list is the great depression.

So now that we're here, what do we do? I am massively conflicted about this bailout program. The idea of government stepping in to bail out international banks that were reckless with their own business literally makes my stomach churn. We are privatizing gains and socializing losses.

As George Will wrote this week: "Treasury Secretary Paulson, asked about conservative complaints that his rescue program amounts to socialism, said, essentially: This is not socialism, this is necessary. That non sequitur might be politically necessary, but remember that government control of capital is government control of capitalism."

Unfortunately, he's right. In fact, it would have to take an absolute disaster to make me even consider supporting something like this. Welcome to that absolute disaster.

In the weeks following that DEFCONOMY column, I moved from thinking this meltdown scenario was a frightening possibility to realizing it was a near inevitability.

While it took the people in power far too long to recognize it, they are now understanding the same sad truth. This bailout plan is not a good idea -- it's an absolutely terrible idea. It's just the only idea we have left.

Our financial system is like a 747 flying around with all four of our engines on fire. The bailout effort will not stop us from landing hard, but without it, we may simply drop out of the sky. Will a bailout save us?

What Congress is attempting is a last-second search for an open field to land this plane with as little damage as possible. With that in mind, I think some kind of action may be a necessary evil, but we must be very, very careful.

Action for the sake of action, much like change for the sake of change, doesn't solve problems. It usually inflames them. And what's worse is that it creates brand-new catastrophes we haven't even considered yet. Wall Street and Congress have been playing with fire, and now it's Main Street that's beginning to sweat.

The opinions expressed in this commentary are solely those of the writer.

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