Economic Turmoil

It has been well over a year since the word subprime entered our daily dialogue. The issues surrounding the credit crisis have lasted longer than most thought possible, and provided wider repercussions than many fathomed. It has led to bailouts, stimulus packages, and seemingly constant turmoil in the stock market. Bear Stearns is no more, Fannie Mae and Freddie Mac have been nationalized, Lehman Brothers has gone bankrupt, and the world's largest insurer, AIG, has been rescued by the Federal Reserve. In addition, short-selling, a beacon of our "free" market, has been taken off the table and a $700 billion package has been unveiled to allow the federal government to buy the mortgage loans that are causing the credit markets to seize up. What once seemed impossible now seems commonplace.

(Click for NY Times graphic showing the unbelievable transformation of the financial sector)

Wall Street is coming off it most turbulent week in decades. It is now the taxpayers, many of them diligent and prudent, who will pick up the tab for Wall Street's insatiable appetite for profits. This past Thursday and Friday represented the greatest two day rally in the Dow Jones since October 30-31, 1929. The 29% rally in 1929 was, you guessed it, followed by the 86% decline now referred to as the Great Depression. Paulson and company may have saved us from financial Armageddon, but I believe it is too early to sound the all-clear.