Global estimates of laundered funds sheltered by individuals in offshore tax havens vary between $7 trillion and $12 trillion. Yet only three postage-stamp size countries -- Andorra, Monaco and Liechtenstein -- are still blacklisted as tax-dodging havens.

The subprime mortgage meltdown caused banks on both sides of the Atlantic to write down some $400 billion (UBS puts the final banking-sector loss closer to $600 billion, which means scaling back lending by $2 trillion), and sent the dollar to an all-time low against the euro. It also put 2 million U.S. homeowners at risk of losing their homes, countless millions of others of losing 30 percent of the value of their real estate in 2008, pushed oil over $100 a barrel, and gold to nearly $1,000 an ounce.

Harvard's Lawrence Summers, a former U.S. treasury secretary (1998-2001), said subprime spawned the most serious crisis in housing since the Depression. Near worthless mortgage-backed securities were repackaged by greedy predatory operators to look like soul food for the brainless.

Collateral economic damage is huge -- and keeps growing. Diminished borrowing capacity based on a home's value affects consumer spending and cuts in to the local tax base. But so far no CEO dismissals or cuts in executive compensation, even in banks that misjudged and lost billions.

The Union Bank of Switzerland, the world's largest wealth manager, lost $19 billion (total exposure to subprime was closer to $30 billion). Singapore's "Sovereign Wealth Fund" quickly pumped in $11.5 billion, earning the sobriquet of Union Bank of Singapore. The city-state assessed UBS as a good investment based on long-term growth estimates

UBS' chairman and chief executive officer, dour-faced Marcel Ospel, ignored calls from 6,700 shareholders to resign, growled at his board -- and kept his $25 million-a-year job. Citigroup is nursing its subprime wounds by preparing to lay off 25,000 employees.

Financial Times European Editor John Thornhill, assessing why top earners in the risk business feel no pain, says, "What rankles are the undeserving wealthy who take risks with other people's money but never suffer the consequences."

Wounded and distressed, leading investment bankers moved, belatedly, to propose new guidelines on pay and bonuses to the "Institute of International Finance," a global association of banks that met in Rio de Janeiro, Brazil, this week. The initiative was also designed to encourage a fresh look at $20 million to $50 million annual compensation packages for CEOs and to discourage banks from huge cash bonuses to traders who take foolish bets to win a jackpot.

Wall Street CEOs quickly let it be known they would not agree to suspend multimillion-dollar compensation packages until subprime losses had been recovered "because it would take away Wall Street's competitive edge."

Federal criminal prosecutors are investigating whether securities firms booked inflated prices of mortgages despite knowledge of their true valuations. Rating firms are also being investigated for assigning ratings that were too high for instruments backed by subprime mortgages. Collateralized Debt Obligations were loaded with overvalued subprime -- and passed on with the Triple-A seal of sound risk.

Goldman Sachs and Deutsche Bank led a roster of banks that didn't take a bite out of the subprime apple -- but global market turbulence still hit them. Fast-talking mortgage sharks assured millions not to worry about the fine print because the value of their purchase would be up 30 percent the first year. They even advanced the money for a down payment as small as 5 percent, or even no money down.

The administration's $168 billion stimulus program doesn't kick in until the checks go out in May. Tax rebates of up to $500 for individuals and $1,200 for couples filing jointly -- or $300 for individuals who pay less than that in income taxes. All this does little to ease distressed homeowners -- but it adds to the federal deficit.

Fed Chairman Ben Bernanke told this reporter in early September the worst of the subprime crisis was now behind us. But it was just the beginning of a global financial tsunami.

His predecessor at the Fed, Alan Greenspan, conceded he had seen "subprime" ripples coming but didn't think it was any big deal. In early March Bernanke moved to pre-empt Congress. He appealed to banks to forgive large chunks of mortgage loans to borrowers who can't afford to pay and/or those who owe more on their mortgages than their houses are worth.

Unless we learn from this crisis, says the English-speaking world's most-read financial and economic columnist Martin Wolf, "another will put the world economy back on to the rocks in the not too distant future." World food programs for the hungry in Darfur and other areas of malnourishment have already been hit by the hype for crop-based fuel, such as ethanol. Spurred by skyrocketing oil prices, farmers have begun switching from food to fuel, thus causing global shortages. And no one feels this more acutely than the Rome-based World Food Program that expects to feed 73 million people this year. But wheat prices soared 80 percent in the past year.

With 6 percent of the world's population, America's prosperity in recent years has been its ability to borrow $2 billion to $3 billion a day from the rest of the world in return for Treasury paper to maintain the world's highest standard of living, which, in turn, is based on conspicuous consumption at a time of growing world shortages.

Clearly, a new paradigm is needed -- but it's not in the cards. We are simply told to go out and spend more. But what happens if most of us decide to send our tax rebate checks to the bank or pay down credit card debt instead of buying, say, cheap toys made in China for the kids? Or a new keyboard made in Taiwan for the PC? The law of unintended consequences beckons. Several major kicks are on the way. It is, after all, the worst financial crunch since the Great Depression. And talk about "change" won't hack it.

Some 10 million American homeowners will have no equity left in their houses by year's end, according to Merrill Lynch estimates. That can only enhance the Democrats' fortunes in November. New Deal for the 21st century? The stakes are high.

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