On the eve of the day of Great Fools, the Bush Administration has given the “Great Depression” its second major media debut. News outlets are bandying about the words this morning after Treasury Secretary Henry Paulson unveiled what is being called the biggest overhaul of the financial services regulatory system since, well, the Great Depression.

Critics of the 200-page plan say it lacks focus and ignores the real problem of mortgage-backed securities and millions of foreclosures across the country. Sen. Chris Dodd, D-Conn., chairman of the Senate Banking Committee, said the economic collapse was not a failure of regulation, but a “failure of leadership.” Dodd and Rep. Barney Frank, D-Mass., are working on an update of a Depression-era (there’s that word again!) plan that would facilitate a $300-$400 billion buyout of mortgages, allowing nearly 2 million homes to be refinanced instead of foreclosed.

But it’s not just Paulson’s speech today that is causing “Depression” to be invoked. Top economists and analysts are using the word to describe what they say is the worst financial crisis they’ve seen in their lifetime.

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  • Jeff Faux, founder of the Economic Policy Institute, writes today in The Nation that “we are now staring into the abyss.” Home prices are expected to drop another 10 percent, halting consumer spending that makes up 70 percent of our economy. It’s not the “Big One,” he says in his article “Are We Headed for the Next Great Depression?” But it’s A Big One, he says. And it will take years to recover.

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  • Nouriel Roubini, professor of economics at New York University who also served as an adviser in the Treasury Department, says we’re experiencing the worst financial crisis since the Great Depression. He writes a lengthy and compelling article about how and why we are at increasing risk for the “mother of all financial meltdowns.”
  • Allan Sloan at Fortune Magazine writes that we are suffering the aftermath of the collapse of at “Tinkerbell economy” that was dependent on money that disappeared like fairy dust. He cites leading political economist Allan Meltzer of Carnegie Mellon, who argues the current situation is unusual, but not unprecedented. The last time we saw a collapse like this? In 1929, he says. Which resulted in the Great Depression.

Photo: Franklin D. Roosevelt Library