On Sunday FDIC Chairman Sheila Bair spoke out against the regulatory protection of the big Wall Street banks, also known as "too big to fail".

"We need to end 'too big to fail' and this needs to be an overarching policy that applies to everyone," Bair said.

Bair has a lot of distinguished company.

In the debt-based currency system of today credit is the life-blood. Without credit the economy has no money and nothing can grow.
That's why all this talk about economic recovery is puzzling. There is no talk about more jobs, higher incomes, or more paid working hours. So any recovery must come from credit. Yet it is credit that is lacking.

Professor Tim Congdon from International Monetary Research said US bank loans have fallen at an annual pace of almost 14pc in the three months to August (from $7,147bn to $6,886bn).

"There has been nothing like this in the USA since the 1930s," he said. "The rapid destruction of money balances is madness."

The Assistant Secretary for Financial Institutions Michael S. Barr gave written testimony before the House Financial Services Committee today that put things into perspective.

[W]e recognize that any modification program seeking to avoid preventable foreclosures has limits, HAMP included. Even before the current crisis, when home prices were climbing, there were still many hundreds of thousands of foreclosures. Therefore, even if HAMP is a total success, we should still expect millions of foreclosures, as President Obama noted when he launched the program in February.

The thing to keep in mind is that there is no chance that HAMP will be a total success.

The report out today says that the Federal Housing Administration is having the busiest year in its history.

Almost a year after the federal government launched its rescue of the housing market, nearly one in four new mortgages is insured by the Federal Housing Administration.
...
FHA loans also have become more popular because of the demise of many subprime lenders, which sometimes allowed buyers to purchase a property with nothing down and no documentation of income.

Remember what went wrong with the subprime housing market? People getting easy credit with "no skin" in the game buying houses they couldn't afford. Oh sure, there was massive fraud too, but that wasn't the cause of the bubble.
And yet, the federal government seems determined to do the exact same thing that got us into trouble in the first place. Only this time it is your taxpayer dollars that are financing it.

There's been a lot of talk recently about the economy. Has it bottomed? Are we recovering? Will we see a "V" shaped bounce? Or a "U"? Or a "W"?
Since most of the economic numbers are still negative, it seems a little premature to talk about a recovery. Nevertheless, since the cheerleaders of the economy have brought it up, let's examine exactly what is going to lead this economy out of our deep recession.

In order to do that we must look at a topic that the Green Shoots crowd doesn't mention much - the fundamentals of the economy.