I'm watching for any further evidence of Federal Reserve intervention in the markets. So far the only transaction was for $2 billion in overnight loans, a fairly normal event size for a Monday and some indication that calm has restored. The European Central Bank is in for another $65 billion, about half the intervention level last week. Markets appear to be normal as well.

That's for today. Longer term, there's still the real estate market and the consumer more generally to worry about. James Picerno looks at today's retail sales data, which may be sold in the press as more positive than it really is.

Judging by the [declining] trend in retail sales, one is tempted to extrapolate the past into the future. All the more so, given the fallout in the mortgage market of late. It's not yet clear if this fallout will spill over, if ever, into the general psyche of consumer spending, but at this point we'd be foolish to dismiss the notion entirely.

And this from today's New York Times doesn't help: The housing market decline is spreading to places you wouldn't think, like Stockton.

The deadening market for houses has only worsened problems for people like Alma Neri, a mother of three boys who bought a modest house in Stockton in 2002 for $223,000. Three years later, Ms. Neri and her husband, Juan, found an even better house � three bedrooms, two and a half bathrooms, a two-car garage � around the corner. The plan was to sell the old house to pay off its mortgage, and live out their days in their dream home.

But now, both of the Neris� houses are languishing on the market, and the debt from two mortgages � and an equity loan they took to remodel the new house � is piling up.

�We made bad decisions,� said Ms. Neri, 30, who commutes to her job as a contractor in Pleasanton, about 50 miles to the west. �We�re worried if we don�t sell by the end of the year, we will lose one of them. We just didn�t see the downturn coming.�

It is tempting to call the Neris speculators and allow them to suffer the losses they risked when they bought the second house. Some people will make this into a political issue instead, using other people's money to make the Neris whole.

UPDATE: Two pieces of background:

• Subprime 'crisis' FAQ by Steven Ceccheti
• The WSJ primer on open market operations

Labels: economics, housing, Minnesota, politics