Optimus Subprime transforms, threatens U.S. economy

CHIP SOMODEVILLA/Getty Images News You may have thought that the U.S. economy was in good shape after the subprime mortgage debacle failed to have us all living in cardboard boxes and eating grass. That’s an unlikely scenario, but the latest news suggests that we’re hardly out of the woods. Investment house Bear Stearns set off ...

600492_070718_bernanke_05.jpg
600492_070718_bernanke_05.jpg

CHIP SOMODEVILLA/Getty Images News

You may have thought that the U.S. economy was in good shape after the subprime mortgage debacle failed to have us all living in cardboard boxes and eating grass. That's an unlikely scenario, but the latest news suggests that we're hardly out of the woods. Investment house Bear Stearns set off warning bells on Wall Street yesterday when it announced that two of its hedge funds, heavily invested in subprime mortgages, are pretty much worthless. Even the top-rated subprime-related bonds are beginning to be affected by the crisis, worrying investors.

U.S. Federal Reserve Chairman Ben Bernanke made headlines today when he told Congress:

CHIP SOMODEVILLA/Getty Images News

You may have thought that the U.S. economy was in good shape after the subprime mortgage debacle failed to have us all living in cardboard boxes and eating grass. That’s an unlikely scenario, but the latest news suggests that we’re hardly out of the woods. Investment house Bear Stearns set off warning bells on Wall Street yesterday when it announced that two of its hedge funds, heavily invested in subprime mortgages, are pretty much worthless. Even the top-rated subprime-related bonds are beginning to be affected by the crisis, worrying investors.

U.S. Federal Reserve Chairman Ben Bernanke made headlines today when he told Congress:

One risk to the outlook is that the ongoing housing correction might prove larger than anticipated, with possible spillovers onto consumer spending.”

But the Wall Street Journal‘s Greg Ip looks on the bright side, noting that the overall tenor of Bernanke’s remarks and the accompanying Fed report (pdf) on monetary policy was upbeat. And the stock market was humming yesterday, reaching new heights. Perhaps Bernanke is just hedging his bets?

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