Wall Street Interpreting reports currently coming out of Wall Street is like tracking a vast hurricane as it rages its way through the Gulf and toward a population center: Conditions are way too chaotic to make confident predictions, but preparing for the worst probably isn’t a bad idea.

As recently as a year ago, no one could possibly have foreseen the disappearance of three of the big five Wall Street investment banks, or the nationalization of our nation’s two mega-mortgage refinanciers. We have officially entered uncharted territory — it’s as if the sky had turned lime green and sprouted polka dots.

The overall stock market’s losses might seem relatively tame today — as I write this, the Dow and S&P indices are down about 3 percent, hefty losses, but hardly a free fall. Yet the crisis is far from over. As bankrupt Lehman "unwinds" its positions in mortgages and "credit default swaps," it’s essentially dumping billions in junk securities on the market.

That move further lowers the value of all sorts of highly exposed companies — from AIG, the world’s largest insurance company (whose shares are down a startling 66 percent as I write this) to Freddie Mac and Fannie Mae, recently acquired by us, the taxpayers.

While it will take months if not years to tease out the full implications of this ongoing implosion, I can make out two environment-related implications.

1) As we lurch deeper into the era of climate change, the federal government — i.e., the taxpaying public — is on the line for tens or hundreds of billions in bailout funds. Money that might have gone into investing in energy-saving public transportation infrastructure, or building a carbon-light electricity grid, will now go into cleaning up the messes created by a few bankers and mega-fund managers.

Consider our new acquisitions, Fannie Mae and Freddie Mac, holders of trillions in mortgage paper of which an untold amount is actually worthless. Who’s now left holding the bag? The amount we shell out to make good on Fannie and Freddie’s obligations will surely dwarf the $29 billion the U.S. Treasury pledged to back up potential bad debts in the JP Morgan-Bear Stearns tie-up. As Gretchen Morgenson put it in Sunday’s New York Times, "It certainly brings new meaning to the notion of an ownership society, doesn’t it?"

Then there’s the phenomenon of megabank Bank of America, snapping up Merrill Lynch for $50 billion (a surprisingly high price given Merrill’s straits, but a fraction of what the one-time Wall Street titan would have fetched a year tor two ago).

This deal might seem at first glance to be a free-market solution to the mortgage mess. Not so fast. Why did it make sense for BOA to buy Merrill? Because BOA has a vast base of federally insured deposits, which might need to be raided if Merrill’s extensive mortgage paper tanks further in value.

It’s important to note when the federal government first started insuring bank deposits, commercial banks like Bank of America weren’t allowed to own investment banks. That meant that the public wasn’t exposed to massive Wall Street gaffes. But the Clinton administration — under then-Treasury secretary, and now Citigroup exec, Robert Rubin — oversaw the withering away of those rules. So now we — the public — are on the line for Merrill’s bad decisions.

In other words, the BOA-Merrill deal exposes taxpayers to Merrill’s bad debt. Finance professor Nouriel Roubini of NYU’s Stern School of Business predicts that the remaining two investment banks — Goldman Sachs and Morgan Stanley — will both soon be taken over by big banks for this reason. These are backdoor public bailouts of once-mighty Wall Street firms.

In short, our financial position heading into climate change has been severely weakened by this unprecedented mess.

Why, by the way, is the financial calamity not an issue in the presidential election? I’ll let more politically adept folks grapple with that one. I remember that in 1988, when the savings-and-loan debacle began to erupt during the presidential election, Michael Dukakis maintained a polite silence — no doubt thinking of the many Democratic lawmakers implicated in the scandal. I hope Obama makes more noise.

2) More short-term, the mess places downward pressure on oil prices. Does anyone still doubt that we’re heading into a global recession? While Wall Street implodes, the so-called "real economy" is tanking:

Government data show the nation’s industrial output plunged in August by nearly four times the amount that had been expected. It’s the worst performance since Hurricane Katrina devastated the Gulf Coast in 2005.

Of course, recessions mean less oil consumption — and lower prices. In weekend trading, oil plunged to a seven-month low. Not only are traders betting on slower economic growth, they’re also stampeding in panic toward boring but safe bets like Treasury securities.

If the Saudis keep their taps open as the global economy stumbles, we could be looking at an oil-price crash. And that might work in the interests of OPEC and the Western oil companies. They still make lots of money when oil goes for, say, $50 a barrel, while also significantly slowing efforts to conserve and look for real alternatives.