The more I study the financial meltdown our economy is in the midst of, the more pissed off it makes me. I am by no means an expert when it comes to the financial world, but I’ve tried to keep up with what’s going on having invested money for several years now and bought a house two years ago.

I want to try to help anyone who hasn’t been keeping up with what’s going on because this mess affects you. Again, I have absolutely no cred to be doing this, so if anyone who does have some financial street cred wants to speak up, please do.

How we got here: This article does a great job of giving the entire history of the subprime meltdown. The short of it is that the mortgage industry took advantage of low post-Sept. 11 interest rates to attract new homebuyers and encourage people to move up the homeownership scale. As the real estate market grew in a crazy way, investment companies were spending a lot of money on new yet risky ways to back the mortgage industry. Add to that the everyday people who were in no financial shape to be buying homes and yet were buying them anyway thanks to the attractive yet very, very bad adjustable rate mortgages, interest rate mortgages, no-down-payment mortgages, etc.

Basically, the financial industry was selling the idea that there was no way to lose at real estate to people who had no chance at winning.

Where we’re at now: Home prices dropped, home sales stalled and people started defaulting on their mortgages. The companies that were backing the risky mortgages stopped investing as they saw the writing on the wall of an impending crisis. That left the mortgange companies in a bind without cash and they began to fail. The investment companies left holding a lot of those risky investments also began to fail.

A few of the more stable finanical companies came to the rescue by buying the failing companies’ assets. Treasury Secretary Henry Paulson, congressional leaders and other financial leaders were trying to hammer out a $700 billion bailout plan that would allow Paulson to help resucitate some of the other failing financial institutions by buying their problematic assets. The government would then hopefully sell those assets in a few years once the economy is (hopefully) stable again and make some of that $700 billion back. That bailout plan failed in a vote in the House today.

The stock market has practically been in a free fall based on every bit of bad news that’s come out regarding the meltdown, including today. Congress is trying to recess soon so members can start campaigning for the upcoming election, so it seems as if there’s a narrow window to get something done.

How they voted: Here’s a list of how the House voted today if you’re concerned about how your representative is representing you (which, duh, you should be).

How it affects you and I: Basically, financial institutions are in a trust-no one mode. They’re really leery about lending money or investing in other financial institutions for fear of falling victim like many of the companies that have failed. That trickles all the way down to you and I when we want something simple like a car loan or credit to buy a flat-screen TV from Best Buy or even something as large as a house. It’s going to be harder for us to secure those loans and credit lines and student loans if you’re planning on going to college.

That also goes for the businesses we rely on. They can’t get the credit lines and loans they need to purchase inventory, so they’re not going to have inventory to sell. That could cause those businesses to go under, which in turn means unemployment and lack of jobs. Which means less consumer purchasing power. Which means recession. And possibly depression.

Also, the stock market is extremely volatile. If you’re doing the right thing by saving for retirement and a rainy day, then chances are you have some money invested in one way or another. No investment is completely safe right now. You’ve probably seen the value of your investments drop in recent weeks.

What needs to be done: Obviously I don’t know the answer to that, or else I’d like to think I’d be up in D.C. trying to help solve the problem. We’re in largely uncharted territory with this mess. The economy, left to its own devices, would likely eventually fix itself, but it would be a very, very long time in coming. In the mean time there would be recession, possibly depression and suffering.

The bailout is really the only comprehensive solution that’s been offered. No one knows if it would work for sure. It would at least slow the meltdown and likely lessen the blow. Even if it does work as expected, things will get worse before they get better. Many purists prefer the laissez-faire approach and dislike the notion of government involvement in our free market economy.

I’m a libertarian at heart: liberal on personal freedoms; conservative on financial principles and in favor of as minimal of a government as possible. I’m completely split when it comes to how to deal with this financial crisis. Part of me wants the government to let these companies and individuals who made such poor decisions to have to deal with the consequences, not to mention a bailout is a bad precedent to set. Sure, it’s going to affect those of us that didn’t buy into the mess, but we could all stand to learn how to live more frugally and responsibly. As the Modern Beau and I agreed on the other night: No one has had to live simply really since World War II and it’s a lesson we all need to appreciate.

But, I think it’s probably best to be proactive and if $700 billion is what it takes, then so be it. At least it’s being spent within our own borders. The humanitarian in me doesn’t want to see the poor or innocent suffer for the decisions of the greedy. The bailout package included some provisions that aimed at preventing a similar crisis in the future and was the result of a bipartisan congressional compromise, which is something I’m always interested in encouraging. My 401k has lost a lot of money in recent weeks, and I don’t want to see my hard-earned money vanish any more than the next person. There’s also a chance that if we don’t try to fix the mess we’re in that the dollar is going to get even weaker internationally and cause us even more trouble.

What do you think? Have you been following this mess? Do you have some additional insight to add?