A couple snapshots from the active meltdown.  All emphasis mine:

-Another bank failed…

U.S. banking regulators swooped in to seize mortgage lender IndyMac Bancorp Inc on Friday after withdrawals by panicked depositors led to the third-largest banking failure in U.S. history.

California-based IndyMac, which specialized in a type of mortgage that often required minimal documents from borrowers, became the fifth U.S. bank to fail this year as a housing bust and credit crunch strain financial institutions.

The fifth?  I know about Bear Stears, but what were the other three?  Much as I’ve been keeping up with this, I don’t recall a mention of those. Hmmm…

IndyMac will reopen fully on Monday as IndyMac Federal Bank under Federal Deposit Insurance Corp supervision, but tensions ran high as customers at a branch at its Los Angeles-area headquarters read a notice in the window saying it was closed.

At another branch down the road, a man who said he had more than $200,000 in an account — twice what is normally FDIC guaranteed — argued with a security guard who was closing up.

The FDIC, which will seek a buyer for IndyMac, estimated the cost of the bank’s failure to its $53 billion insurance fund at between $4 billion and $8 billion.

So some other bank is going to get a ridiculously sweet deal eventually in absorbing them, and the public is going to eat the costs.  In the meantime, the government owns it.  Also, if the man with the account mentioned in the story is any indication, future banking will require the average person to know the terms and regulations by heart before they can believe that their money will be there, because Gawd Forbid you end up saving more than they can be trusted with.  Ponder this for a moment.

-Fannie?  Freddie?  Fucked:

A private equity executive who formerly headed up regional bank North Fork Bancorp Inc said on Friday that some form of nationalization of Fannie Mae and Freddie Mac was “inevitable.”

“The combination of the real problems that these companies have with the perceived problems that they have is deadly,” John Kanas, now a private equity partner at WL Ross & Co, said in a telephone interview.

He described the mortgage entities as “critical,” saying the backing they provide is not just for the mortgage market, but also supports the smooth running of the wider financial markets.

Nationalization, however, is not going to be problem-free, he said. Assuming the government fully backs the companies, that would imply the equity behind them is wiped out, he said.

“That alone is going to cause great dislocation,” he added.

The average person right now is probably thinking “What does he mean ‘nationalize’?  Aren’t they national already?”.  Well, they’re quasi-national in that they’re old-fashioned corporations explicitly chartered via a political act.  They’re nominally controlled as “private” businesses despite the backing of the State.  The result of such an amalgamation — socialized cost and private benefit — could be seen a mile away by us cranks, what with our habits of quoting dead economists & pointing out that capitalism is in fact not synonymous with a free-market.  But you know things are going tits-up when big financial players are willing to acknowledge a contradiction they themselves operate on, and you can find descriptions of privatized gain & socialized loss, in the context of arguing Fannie & Freddie should both be allowed to fall, in the pages of Business Week!

The root of all this mess, ranging from mortgages to credit to even our foreign policy, is that a long time ago the rulers of this country decided that whoever had the most money should make the rules.  Naturally, they tried to build in shields to the consequences of their own actions.  Realizing this is key to any meaningful shift, no matter how painful it may be in the short-term.

To put it less charitably: in the messageboard that is my life, the next person to say the problem is “the market is too free” is going on Ignore.