Polemics & Exchanges

On Our Subprime Economy

It is fitting that one of the signal events of what will likely become the second Bush recession has been the Federal Reserve’s propping up of the Wall Street firm Bear Stearns.  For years, Wall Street has opposed similar bailouts of old-line manufacturing firms being swept away by the tsunami of free trade and has applauded as employers have cut their workforces, the benefits they provide, and indeed their presence in the United States.  The Wall Street mantra has been layoffs good, outsourcing better.  But when the time comes for Wall Street speculators to experience the “magic of the marketplace,” the tune has been different, with Treasury Secretary Henry Paulson saying that “I really support the Fed’s work here.”  Of course, the Federal Reserve’s bailout of Bear Stearns, followed quickly by J.P. Morgan’s acquisition of the firm, comes hard on the heels of many other federal efforts to prop up a financial sector in trouble as a result of its own avarice, including the federal bailouts for foolish subprime mortgages contained in President Bush’s stimulus package.

The economy may be heading for even more serious trouble.   Even Martin Feldstein, once President Reagan’s chief economic advisor and a very mainstream economic figure, has stated that we are in a recession, that this recession could be the worst since World War II, and that “powerful forces will continue to drive...

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