Kass: Fed Is No Savior in Subprime Slide

As we move into the summer or fall (at the latest), there will be better visibility of the subprime problems. By that time, it will be abundantly clear to even the bulls that an inventory-swollen housing market is back on the sick bed as the two most important marginal buyers -- the first time and trade-up buyers -- have lost access to home-financing. And, by then, the multiplier effect of the housing downturn should be in full force, causing the economy to sputter and for corporate profit expectations to fall to more realistic levels.

The upheaval in the subprime mortgage industry is in its middle stages, but the broad impact on the U.S. economy is in its infancy. To paraphrase, Frankenstein's Dr. Waldman, the credit markets and Wall Street have created a monster -- subprime -- and it will destroy the economy.