Barry Ritholtz at The Big Picture continues to smack down the Wall Street apologists trying to shift blame to Fannie and Freddie. Fan and Fred are hardly blameless institutions, but they’re not much more than smokescreens for the real culprits in the big picture.

As I have said repeatedly, Fannie and Freddie were cogs in the great housing machinery, and they bear some responsibility for the current debacle. But to claim they were the most significant factors misses the true tale of our twin Housing and Credit debacles.

Fannie has been around since 1938, Freddie since 1968, the CRA has been around since 1977 — suddenly, all of housing goes to hell in 2005, and then credit collapses 2 years after — and the best explanation some people can come up with is Fannie, Freddie and CRA? Gee, isn’t that rather odd — especially after 70 years?

Then there is the international issue: If Fannie and Freddie and the 1977 CRA (and amendments) are to blame for the US boom and bust, how did the rest of the world end up with a housing boom too? Why did prices and sales go skyward in the UK, France, Spain, Ireland, Australia, etc.? They had no CRA, or a Fannie Mae, or a Freddie Mac, — so then what caused their housing boom?

The short answer: Ultra low rates, securitization, and perhaps some of our homegrown, innovative lending standards.

Still trying to figure out credit-default swaps? 60 Minutes had a good segment Sunday on what they are, how they got out of hand, and why they’re the damage multiplier in the financial crisis. The piece gets at something I’ve been wondering about CDS:

“The problem was that if it were insurance, or called what it really is, the person who sold the policy would have to have capital reserves to be able to pay in the case the insurance was called upon or triggered. But because it was a swap, and not insurance, there was no requirement that adequate capital reserves be put to the side.”

It’s worth watching or reading the whole thing.

(h/t Calculated Risk)

The Washington Post has a good story on page one today, warning of something that sounds very much like depression to me and saying that $700 billion may not be near enough:

Robert B. Zoellick, president of the World Bank, said the global financial system may have reached a “tipping point” — the moment when a crisis cascades into a full-blown meltdown and becomes extremely difficult for governments to contain.

The mushrooming problems “will trigger business failures and possibly banking emergencies. Some countries will slip toward balance-of-payment crises,” he said yesterday, speaking at the Peterson Institute for International Economics.

The crisis threatens to reverse years of prosperity that financed the economic growth in developed and emerging countries through a global financial system that made credit widely available.

The scary thing is this I can’t criticize the Post for scaremongering. The Journal also makes the $700 billion-isn’t-near-enough point here.

The Journal’s Heard on the Street is right on here:

One of the mistakes of this crisis has been to assume it is based simply on irrational fear, rather than fundamentals.

Much of the ugliness is actually an untidy adjustment following two decades of over-lending.

David Brooks’ column today shows the Chicago School and its efficient-markets theory is in retreat:

The economists talk about “mispriced risk” and “illiquidity” in the system. But many economists are trained to downplay emotion, social psychology and moral norms, and so produce bloodless and incomplete descriptions of what’s going on. The truth is, decision-making is an inherently emotional process, and the traders in charge of these trillions become bipolar as a result of their uncertainty.

Are we finally watching the end of the financialization of the economy (a phenomenon Kevin Phillips has warned about)? This Journal piece on companies that feed off the big financial firms suggests so.

The effect on these companies “has been nothing short of devastating,” says Charles Doyle, managing director at Business Capital, a San Francisco company that provides financing and restructuring services for distressed companies. “It is complete carnage.”

Many of Mr. Doyle’s clients — mostly small-business executives — have already cut staff and borrowed against their assets, he says. Some are using credit cards to survive and have stopped taking paychecks themselves. He adds that many of their accounts receivable are so far past due that they are considered uncollectible by lenders, which can limit a company’s borrowing options.

The Journal says up next to choke the economy is credit cards. Consumers are increasingly late on payments and the paper says credit lines are about to be tightened. Audit don Dean Starkman wrote about changes in the credit-card business that the press had largely missed here.

Bloomberg writes that the SEC “censored” its inspector general’s report on the agency’s failures in regulating Bear Stearns. Senator Chuck Grassley got hold of the unedited version of the report and posted it.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.