What’s his alternative?

In recent days, the federal government has stepped in to bail out mortgage giants Fannie Mae and Freddie Mac, while the Treasury Department took a contrasting decision to stand aside and let the Lehman Brothers investment bank seek bankruptcy protection.

Another longtime Wall Street institution, Merrill Lynch, announced it will accept a discounted buyout from Bank of America.

And on it goes.

Democrats immediately attempted to tie the growing financial crisis to Republicans by singling out “the policies advocated by John McCain’s former senior adviser,” citing a 1999 law co-sponsored by then-Sen. Phil Gramm, R-Texas., that paved the way for consolidation between commercial and investment banks.

(Mr. Gramm served as GOP presidential candidate McCain’s chief economic adviser until July, when he resigned after drawing fire for commenting that America is in a merely “mental recession” and has “sort of become a nation of whiners.”)

Senate Majority Leader Harry Reid, D-Nev., made a scathing floor speech Tuesday morning in which he paid his standard unearned compliment to Herbert Hoover, using “the Great Engineer’s” name as a synonym for do-nothing-ism. At least, I assume that’s what he meant when he compared Sen. McCain’s economic approach with that of the Hoover administration.

(In real life, Herbert Hoover was known as “the Great Engineer” not merely because of his background building public works projects, but because he was just the kind of economic meddler the Democrats now pine for, sitting up late at night on the telephone, wrangling business leaders not to slash inflated wages and prices — obvious but rejected adjustments which might have brought the Great Depression to a much quicker end. Nor did the policies of the dilettante Franklin Roosevelt — who campaigned against Hoover in 1932 on a solemn vow to “immediately and drastically reduce government expenditures by abolishing useless commissions and offices, consolidating departments and bureaus … to accomplish a savings of not less than 25 percent in the cost of the federal government,” and who once elected would literally get up in the morning and joke with his advisors about where they should set the price of gold that day — fix anything. The Great Depression was worse by many measures in 1937 than it had been in 1933.)

“The same Phil Gramm who, as a senator, was responsible for deregulation in the financial services industries that paved the way for much of this crisis to occur,” Sen. Reid clarified Tuesday, presumably puzzling many busy workers at the FDIC and Federal Reserve, since their agencies would no longer exist if the financial services industry had truly been “deregulated” a decade ago.

“It was Phil Gramm who pushed legislation through a Republican Senate that allowed firms like Enron to avoid regulation and destroy the life savings of its employees, and it was Phil Gramm’s legislation that now allows Wall Street traders to bid up the price of oil, leaving us to pay the bill,” Sen. Reid said.

Out on the campaign trail, Democratic presidential nominee Barack Obama blamed the falling dominos on “the economic philosophy” that he said Republican rival John McCain shares with President Bush.

The finger-pointing is fully expected, though there’s plenty of blame for all. It was Democrat Bill Clinton who helped reshape the financial landscape in the late 1990s, after all, signing the bill that removed Depression-era barriers between commercial banks and investment firms as part of a shift in which left-wing Democrats sought to loosen up mortgage practices, complaining minority neighborhoods were being “red-lined.”

That, in turn, allowed the creation of these very financial behemoths which — we now realize — sought higher returns to stay ahead of inflation by buying complicated mortgage derivatives based on those same unsound lending practices Democrats had demanded.

And who originally turned loose the Federal Reserve to inflate the currency by severing the links between the paper “dollar” and silver and gold — launching this race for unrealistically high rates of return?

Democrats Franklin Roosevelt and Lyndon Johnson — though subsequent Republican administrations went happily along for the ride.

It’s exasperating that the parties now pretend to fundamentally disagree on what should be done, when it’s equally clear more heavy-handed regulation of these institutions will be forthcoming no matter which candidate is elected.

But since we’ve been hearing a lot about “code words” lately, it seems fair to ask what Sen. Obama means when he blames the current meltdown on “the economic philosophy” that he says Republican rival John McCain shares with President Bush.

What “economic philosophy” can he be referring to, and what would be his alternative?

As the Wall Street Journal and Investors Business Daily and the National Review day by day dig deeper into the associations that have formed the worldview of this young Chicago “community organizer” with so little experience in the private sector — his childhood mentor, poet and Communist Party member Frank Marshall Davis; the patron saint of the modern “community organizer,” Saul “The Red” Alinsky; William Ayres of the Weather Underground; America-hating radical preacher Jeremiah Wright — it’s hard to conclude he means to blame anything but “the economic philosophy” known as free-market capitalism.

If Sen. Reid believes “Wall Street traders” should not be allowed to “bid up the price of oil, leaving us to pay the bill,” how would he stop them? By installing federal price controls on the price of oil? Former Soviet economic adviser Yuri Maltsev tells us how well that worked in the Soviet Union: “The government guaranteed chicken would never sell for more than 40 kopeks, and it never did. Of course, there was no chicken in the stores. …”

Price controls bring shortages, rationing, and black markets. Consumers might like oil back at $30 a barrel, but could any oil be produced or imported at that price — given how the Fed has devalued the dollar — or would our tanks simply run dry?

(Traders don’t “leave us to pay their bills,” by the way. You can only “bid up” the price of oil by offering to buy it at a higher price. If the traders fail to pay, that’s the end of their days on the floor. It’s only members of Congress who spend money they don’t have and then “leave us to pay the bill.”)

Mind you, neither George W. Bush nor John McCain is a radical free-market, laissez-faire kind of guy. If anything, John McCain failed to light a fire under his conservative Republican base — until his selection of running-mate Sarah Palin — precisely because he shares far too much of the taste for government meddling and regulation favored by Senators Reid and Obama. (See “McCain-Feingold.”)

But since Sen. Obama has criticized the underlying “economic philosophy” shared by President Bush and Sen. McCain, which can only be a code word for “free-market capitalism,” he should now come clean with the American people.

As an underlying economic philosophy, there are only two known alternatives to “free-market capitalism”: fascism and communism.

Sen. Obama should explain which of the known alternatives he prefers.

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