The most serious financial crisis since the 1930s exploded this week, plunging global markets into a meltdown, pushing credit card rates up, threatening life savings and pensions, hiking the jobless rate, and sending John McCain and the Republicans scurrying for cover.

The bankruptcy of Lehman Brothers, the largest financial firm to collapse in the credit crisis, coupled with the failure of Merrill Lynch & Co. and the collapse of AIG, the world’s largest insurance company, all within 24 hours, triggered fear among workers worried about the aftershocks.

Yet McCain, who has long backed deregulation of the finance industry, declared that “the fundamentals of our economy are strong.”

“What economy is he talking about?” his opponent Barack Obama asked at a campaign rally. “Eight years of policies that have shredded consumer protections, loosened oversight and regulations, and encouraged outsized bonuses to CEOs while ignoring middle-class Americans have brought us to the most serious crisis since the Great Depression.”

Obama warned, “This turmoil is a major threat to our economy and its ability to create good paying jobs and help working Americans pay their bills, save for their future and make their mortgage payments.”

John Sweeney, president of the AFL-CIO, which is strongly backing Obama, said in a statement, “These events make clear the desperate need for a president who understands the nature of the economic crisis facing our country and has a concrete plan for rebuilding our economy that is founded on good jobs rather than financial bubbles.”

The financial earthquake sent markets around the world into a slump as countless businesses, large and small, made plans to slash expenses and lay off workers. Layoffs are expected to go well beyond the tens of thousands who are losing jobs as a direct result of the Wall Street meltdown.

The financial giants collapsed under the weight of bad loans and get-rich-quick schemes permissible now on Wall Street after a Republican- and McCain-backed era of deregulation that began when the GOP controlled Congress during the Clinton administration in the 1990s.

“A generation of conservative propaganda, arguing that markets make wiser decisions than government, has been destroyed by these events,” wrote William Greider, national affairs correspondent for The Nation.

Doug Henwood, editor of Left Business Observer, said the underlying cause of the crisis is “maldistribution of income” in the United States. “Until this is addressed,” he said, “we’re going to face years of financial problems, economic stagnation, an eroding job market and strains on the standard of living.”

Many observers note that the Federal Reserve Bank’s long-time policy of bailing out wealthy financiers, combined with its refusal to regulate their behavior, has destabilized the economy.

Fannie Mae and Freddie Mac were bailed out last week with no plan to restore them to their original status as nonprofit federal agencies that serve the public’s housing needs.

McCain and his running mate Sarah Palin have attacked Fannie and Freddie as “too big and too expensive to taxpayers” but have remained silent about the need to dismantle the more recently created banking conglomerates that have done irreparable harm to the economy.

These conglomerates arose in the last 10 years after the boundaries between commercial banks and investment banks were lowered by McCain and others in the Senate. Observers note that McCain has never called for either anti-trust enforcement or establishment of rules for firms that are bailed out by taxpayers.

The regulatory role of the Federal Reserve Bank, observers they say, should be assigned to a public agency that is visible and accountable to the public, not to the occupants of corporate boardrooms.

A new, effective set of regulations for the entire financial system is needed, labor and others are saying. The regulations, they say, should end the conflicts of interest on Wall Street and allow responsible investors a say in corporate decisions. Unions that invest pension funds and workers with life savings are examples of the “responsible” investors they point to.

Some are calling for reenactment of federal laws similar to ones promulgated during the New Deal barring banks from charging excessive interest rates. The ability to charge whatever they could get spurred shady lenders into making the bad loans that provoked the current crisis.

McCain claimed the crisis is the “latest reminder of ineffective regulation and management.”

In reality, the crisis developed because commercial banks, stockbrokers and hedge funds, were allowed, in a GOP-McCain-baked scheme, to get into the “swap” business. Through the rampant reselling of loans, they were able to reap quick and vast profits. It didn’t matter if the loan recipient was unable to pay or if the value of the property he or she bought was outrageously inflated. The only thing that mattered was to trade away or insure the paper on which the loan was printed before foreclosure happened.

These shady mortgage swaps were made legal by the Commodity Futures Modernization Act which, with McCain’s help, former Republican Sen. Phil Gramm pushed through Congress in 2000. Gramm was recently McCain’s campaign co-chair, and the senator’s likely pick for treasury secretary, until he was forced out after having described the result of his handiwork as a “mental recession.”