I have literally just scrolled down the first page and found a few comments that need to be addressed as they are simply misguided notions. The lack of economic priniciples in any of these debates is worrying and there are a few things that need to be asserted.

First of all the 'let the banks sink argument' is very weak if your justification is that it will teach other banks a lesson. This is certainly not the case in this scenario given that the failure of the central bank to prop up a bank will not affect behaviour in the short to medium term as you suggest given that their actions have already been undertaken. The failure to prop up one bank will lead them to default on their interbank loans and will lead to a bush fire of bank collapses that would inevitably lead to bank runs similar to those in the 30's. This is why we have central banks.

Secondly the crisis in itself is not attributable to the consumer as suggested in an earlier post. When someone undertakes a mortgage there is an element of risk involved, even on a fixed rate mortgage. What you are suggesting is that the consumers in question are too risk tolerant which is simply not backed by facts. Banks risk levels do fluctuate but consumers levels remain stable across income levels and regional groupings etc. Consumers are generally steady actors in economics and the change in behaviour is generally a sign that the game has changed and loans that weren't available before became available.

In general however the response of the fed is however correct. Lowering interest rates has prevented a full market crash. However this will not cure the underlying problems with the american economy. In order to regain stability and provide a stable enviroment for growth, the monetary policy needs to be met with sound fiscal policy. Bush is lucky in many ways given that inflation is low and so is unemployment. However the ever increasing national debt does need to be addressed by implementing some sever spending cuts. Failure to do this will weaken the dollar further and will bring about inflation.

In the long run america is going to have to bite the bullet however given that massive falls in the dollar are failing to serously boost american exports. It is a little to early to tell but considering the US government has opted for arbus over boeing at a time when the euro/dollar rates are breaking records suggests that the american economy is no longer as competitive as it used to be. Basic trade theory would suggest that a substantial slide in real incomes will need to occur before the dollar regains a competitive stance on the global market. Furthermore it does not bode welll for america that there are 13 economic surge areas in the world at the minute many of which will be in direct competition with the U.S.