The public spectacle continues. Bankers appeared in Congress yesterday.

‘Yes…we sold a lot of toxic, explosive stuff to our clients,’ they said.

‘Yes, we used our own money to bet against them…’ admitted Goldman’s top man.

‘Yes, we blew up the whole world economy. We’re sorry.’

Associated Press reports:

“The bankers – whose companies collectively received more than $100 billion in taxpayer assistance to weather the crisis – offered no regrets for executive pay that is now likely to increase as a result of their survival…

“Lloyd Blankfein, the chief executive of Goldman Sachs, took the brunt of the questions, especially on his firm’s practice of selling mortgage-backed securities and then betting against them.

“‘I’m just going to be blunt with you,’ Angelides told him. ‘It sounds to me a little bit like selling a car with faulty brakes and then buying an insurance policy on the buyer of those cars.’

“Blankfein replied: ‘I do think the behavior is improper. We regret the consequence that people have lost money in it.’ Later, though, he defended the firm’s actions as ‘exercises in risk management.’”

This is not the first time we’ve seen this show. We’re not old enough to remember the Pecora hearings of the 1930s. But they shared the same story line: captains of industry and finance make blunders; they cause Great Depression; politicians save the day.

Back in the ’30s, the guys hauled before Congress generally refused blame. They were just doing their jobs. By and large, they were right.

This bunch today is more media savvy. They realize that their power and money come at a price. The feds have to pretend to punish them; they have to pretend contrition.

And the rest of us can only enjoy the show. After all, it’s the greatest show on earth. We love every minute of it. But it’s only entertaining when you understand the real plot.

What’s the plot?

Well, you already know it. After the bubble blew up, the feds swung into action to repair it. But you can’t really fix a bubble…at best you can only create a new bubble.

The real economy is still deflating. Just look at the jobs situation. Far from slowing or stabilizing, 2009 was the worst year yet for job losses – ’07…’08 …and ‘09…each year has produced greater losses. Even James Grant, who predicted a “barn burning recovery” now admits that his forecast has gone up in flames. He was “either early or wrong,” he says.

And just look at the real estate market. “Home prices are softening again,” says David Rosenberg. As for commercial real estate, here’s Kenneth Laub, who’s been in the business for 50 years, as reported by Bloomberg:

“He says the current downturn will overshadow all of the others…

“‘It won’t be a typical part of a cycle where we’re down for two or three years and things recover,’ says Laub, 70, whose New York firm, Kenneth D. Laub & Co., says it has handled more than $40 billion of real estate transactions since its inception in 1969. ‘It will be longer than we’ve gone through before.’

“As in past slumps, the weak US economy is curbing demand for commercial space, increasing vacancies and causing rents and property values to fall. The key difference today is the explosion in debt financing and related derivatives that fueled a run-up in commercial real estate prices in the 2000s, Laub says. That’s left property owners struggling to make mortgage payments. The overhang of debt will delay any recovery, he says.

“‘It’s not a supply-demand thing; it’s an overleveraged condition,’ Laub says.

“Laub expects a wave of restructurings by troubled commercial borrowers as hundreds of billions of dollars of loans come due annually during the next few years. Commercial real estate may still be recovering a decade from now, he says. ‘What you’re going to see is a tremendously long workout period unprecedented in commercial real estate in this country,’ Laub says. ‘That’s where we’re going, and it’s just beginning.’”

Bad property market. Weak employment market. That’s the background. And it will probably last for years – until the extraordinary debt in the private sector has been worked down to more comfortable levels.

Against this natural process of de-leveraging and depression struggle the feds – our heroes…making the situation worse!

Instead of blaming themselves for their silly theories…for causing the bubble with artificially low interest rates…and then failing completely to understand what they had done…they blame Wall Street.

Sure, the bankers, more knave than fool, took advantage of the situation. But they didn’t cause it.

Still, they’re very sorry they almost brought modern civilization to an end…but, hey, business is business…

Oh the roar of the greasepaint…the smell of the crowd! What a circus!

Bill Bonner is the President of Agora Publishing. For more on Bill Bonner, visit The Daily Reckoning.