“Crisis on Wall Street” is the banner headline in the Wall Street Journal: old Lehman Brothers is bankrupt, AIG’s in deep doo, and Merrill Lynch let its value slip so much that Bank of America is grabbing it for a mere $50 billion. (Let’s hope Charlotte-based BofA knows what it’s doing; Wachovia’s eaten so much in losses from its “bargain buys” on the Street that its stock price is down from the 50s last year to the 10s right now.)

What’s happened to Wall Street is complicated at one level, very simple at another: In the Depression, Congress set up strong regulatory systems for banks and required that retail banking (deposits from the masses) and investment banking (rich people’s money) be completely separate. But all that changed less than 10 years ago. Now, huge hybrid banks can gamble everybody’s money on just about any damned thing. And they did, betting that inflated housing prices would continue to go up. And they lost. Except, of course, for all the fees they collected along the way for passing the bad paper to someone else. But that’s another story.

Here is Bill Scheer’s to-the-point take on what went wrong. In sum, it was Phil Gramm-style Republican economics run amuck, with John McCain smiling and enough Democrats aiding and abetting to get it done.