Earlier I posted on the Housing Market Meltdown that happened last week, where I alluded to a "long tail" of undefined debt that may stall many deals that end up being partly secured by subprime debt.

Today in Who’s in Trouble Next? the New York Times is confirming a "shaky" foundation for many other sectors of the economy due to subprime loans.

"..Unlike investors who hold large stakes in publicly traded American stocks, and must report those holdings to the Securities and Exchange Commission, no central government agency or private organization tracks who may be holding sub-prime or other mortgage-related securities in any detail. "

"..“I don’t think any of the regulators have a handle on where the net exposure of sub-prime is,” Christopher Whalen, managing director of Institutional Risk Analytics, which builds risk systems for regulators and auditors, told The New York Times."

I'm not a financial analyst, I'm a web analyst - but it seems to me that when you can't qualify the amount of loans "out there" that are being financing with sub-prime mortgage backed Securities - that's bad.

And it doesn't stop there as Europe is now beginning to wonder about how much debt there is backed by Subprime loans.  Again, no one really knows how much debt is backed this way:

"..There is no comprehensive data which allows anybody to know how much Europeans have purchased,” Gilles Moëc of Bank of America in London said. “It’s a problem.”

In Market Swings Are First Crisis for Fed Chief, from the New York Times, Ben Bernake is depicted as the person that could swing this crisis one way or the other … ironic, in a way:

"…As a Princeton University economist, for example, he wrote extensively in the 1980s about the causes of the Great Depression. He produced two major books on the subject and he argued that the Fed could have prevented the damaging bank runs if it had provided the necessary liquidity, as he is trying to do now, thus calming depositors instead of forcing banks to turn them away empty-handed.

The Fed failed to do so in the 1930s, departing from tradition. For more than 150 years, Mr. Bernanke has noted, central banks have played the role of lender of last resort, providing enough liquidity to allow banks to operate normally, regardless of the pressures on them.

Some argue that if Mr. Bernanke is unwilling to cut the federal funds rate of 5.25 percent — the interest that banks pay to borrow from the marketplace — then the Fed should at least cut its discount rate.

This is the rate that the Fed charges to lend money directly to banks and other lending institutions, and it is now at 6.25 percent. Mr. Cramer, among others, has called for a discount rate cut, but Mr. Hatzius argues that such a cut might add to the gathering crisis.

Most traders, he notes, expect that by the end of the year, the Fed will have cut the federal funds rate by half a percentage point.

“If the Fed were to cut the discount rate,” Mr. Hatzius said, “then you would multiply the expectations of a much bigger cut in the federal funds rate, and that in itself could be damaging for the economy.”

Ironic that a person who had such a strong opinion about what might have prevented the Great Depression, may, in fact, end up causing the next one.

Here's my thinking about all of this: The Fed started this policy of easy subprime money because it served the purpose of stimulating world economy after the last recession and 9/11 - but the people on the bottom of the ladder - the people who took the only loans they could get in order to live the "American Dream" - and the money lenders are made money off of this - are now going to be sacrificed by Ben Bernanke and the Fed.  

Now, homeowners stuck with subprime loans are being told it's "their" fault for succumbing and taking out those loans and the Fed is just going "throw" them all to the lions (and 7 - 14 million homeowners will lose their homes eventually in foreclosure, according to Cramer).

I think the Fed and the politicians supporting this are the most responsible in the first place.   It's like putting candy in front of a diabetic and when the diabetic gets sick, deciding it's their fault for eating the candy.

At the highest level, if your going to run an economy, overall, your probably not going to be able to be responsive to every special interest; still, if the Fed, in my opinion, directly caused the problem by creating all this "easy" money …….they need to do more than offer cold turkey to subprime loan homeowners.