Facing up to Debt Contagion

First off, check out the definition of contagion. Now you ready to read about debt contagion in this opinion article from USA Today:

These days must be humbling for Wall Street financiers, high government officials and others who not long ago were preaching the virtues of leaving debt markets alone to heal themselves.

They've plainly failed, and at potentially enormous cost to everyone else.

Facing the possibility of a serious financial meltdown, Federal Reserve Chairman Ben Bernanke on Friday engineered a temporary federal bailout for Bear Stearns & Co., a Wall Street investment bank battered by its heavy involvement in mortgage-backed debt, while the troubled firm rushed to sell itself to a more stable suitor.

This action came on top of a broader assistance package unveiled Tuesday that included the Fed taking $200 billion in toxic mortgage-backed securities off the books of major firms in return for U.S. Treasuries — a terrible trade-off for taxpayers but apparently necessary to keep the financial system functioning.

You can read the rest of this article here.