[Mjulian]

The decoupling of risk from reward in the credit markets was an unfortunate side affect driven primarily by cheap capital provided through the Feds misguided monetary policy.

Contagion from the mortgage markets to the corporate credit markets and equities markets, and ultimately the overall economy has occurred. As pokerjoe alludes, it is a natural progression that should be allowed to proceed unfettered by well-meaning regulation.

However, it seems pain is to be avoided at all future costs, especially during an election year; hence, the plethora of "stimulus plans", "mortgage bailouts", etc. Fed monetary policy through fed funds rate adjustments is no longer a functional model for managing economic volatility. I am not sure waht is a better method but I'm sure minds far more brilliant than mine can come up with something effective.

When you think about it, this whole subprime fiasco is US capitalism in a nutshell, good and bad. A product was created to address a real problem: dwindling home ownership among the lower and middle class. Success was gradually followed by excess, abuse, and ultimately implosion.

The key is to let the implosion occur, clean up the pieces and retool. Capitalism is nothing if not resilient.

As Jerry would say, Keep on Truckin'