Other people's problems

There are no firewalls in the residential mortgage market. Subprime lender collapses lead to problems up market.

In turn, this artificially adds to the real estate price drag, further deflating a sector that was one of few bright spots in the Bush economy and whose psychological effects on homeowners helped maintain spending. With those effects reversed, there's one more deflationary force in an economy that has massive debt bombs lurking around every corner.

If our huge outstanding note is coming due, the hangover will be painful.