Now that it appears a bailout deal has been struck, I feel a need to introduce a note of realism to the conversation. Last week in his Senate testimony, Fed Chairman Bernanke said the “bailout was necessary to avoid a recession”. This, I’m afraid, is imaginary thinking. We are in a recession right now and It’s going to get worse. My assumption is that this package will keep us out of a depression. But when the unemployment rate hits 7% and foreclosures keep climbing and people turn to Bernanke and Paulson with the words “but you said…”, there may be more anger floating around than politicians are used to.
They better be sure no to oversell this solution in Washington.