As "Foreclosure Central," California has a unique role in the current national financial and economic crisis. At a minimum, because we drank the most at the party, we have the biggest hangover. But it's more than that. Our behavior during the big bash affected others.

For those who didn't attend the party, this is all very confusing but no less real. The anxiety that ordinary Californians feel when they look at their retirement accounts and consider the stability of their jobs is not unfounded.

But much of the uncertainty comes from not understanding what the great upheaval is all about. That's where our political leaders so far have failed and where they have the greatest opportunity for turning a bad situation around.

In California, in particular, Gov. Arnold Schwarzenegger has been remarkably silent on explaining to Californians what has happened.

The governor and lawmakers are considering an emergency special session just weeks after they enacted an 85-day-late budget. That flawed budget already is more than $1 billion in the red. Further, investors don't want to buy California bonds, so the state is short of money to meet payrolls and pay bills.

But no one has adequately explained to Californians how the financial crisis, the economic crisis and the budget crisis are interconnected and what is their root cause. Without that explanation, the danger is that any economic recovery will repeat all the mistakes that produced the current bubble and bust. And without that explanation, we may fail to turn our creative energies in directions that launch a new economic boom based on sound fundamentals rather than speculation.

As Schwarzenegger and lawmakers work out the terms of a special session, the governor needs to make a major speech addressed to Californians and lawmakers. This is a time where leadership counts and the governor's bully pulpit is more important than ever. When he takes that pulpit, the governor should focus on the following points:

The facts of the situation

• Home foreclosures are at record levels. California accounts for one-third of the nation's foreclosures.

• Severe housing-related job losses now are spilling over into other sectors, as seen in retail and government. California's unemployment rate is now 7.7 percent, the third highest in the nation. The state lost 240,000 jobs in the last year, and things are forecast to get worse before they get better.

• When people lose jobs, direct costs to state government go up as people access the safety net. When they lose their employer-sponsored health benefits, many turn to Medi-Cal. Food stamp and unemployment benefit costs go up. As in many states, California's unemployment insurance trust fund is in danger of insolvency.

• Real estate tax revenues are declining.

• Consumer spending on furniture and appliances, building materials, cars, clothing, restaurants, etc. is declining. So businesses are hurting. Sales and corporate income tax revenues are way below last year's at this time.

But facts are not an explanation. The governor should explain how we got to this point.

From the beginning

The boom in California since 2000 was based on housing-related jobs (the home mortgage industry and construction). Jean Ross, executive director of the California Budget Project, notes that 60 percent of California's job growth from 2000 to 2006 was housing-related. As the UCLA Anderson Forecast said a year ago, "no other state came close to California's reliance on real estate as an engine of growth."

What's wrong with that? Well, over-reliance on housing-related jobs masked weak job creation in other sectors. A truly strong economy is a diverse economy.

But the problem wasn't just overdependence on housing. The larger problem was that the housing boom was built on a house of cards.

Most people know that to some degree. But the details of the story are important, and Schwarzenegger needs to be frank about them with Californians.

Reach Bee columnist Pia Lopez at 321-1904.