USA Today published today the following commentary that I wrote about the economy and about the need for the Fed to cut more aggressively the Fed Funds rate to minimize the effects on the real economy of the current economic recession (as, yes, we have indeed already entered an economy-wide recession now):

Opposing view: Slash rates now Overly cautious Fed moves too slowly to prevent deeper recession.

By Nouriel Roubini

The Federal Reserve should aggressively cut the federal funds rate to minimize the effects on the economy — lost incomes and jobs — of a now unavoidable recession.

The United States is headed toward a painful recession regardless of how much the Fed cuts rates. The factors that make that inevitable include the nation's worst-ever housing recession, which is still getting worse; a severe liquidity and credit crunch in financial markets; high oil and gasoline prices; falling capital spending by the corporate sector; a slackening labor market where few jobs are being created; and shopped-out, savings-less and debt-burdened American consumers who — thanks to falling home prices — can no longer use their homes as ATM machines to allow them to spend more than their income.

To prevent this recession from becoming deeper and longer, the Fed — which has been behind the curve in its assessment of recession risks to the economy — should cut rates more aggressively.

Defenders of the Fed's overly cautious easing so far cite two arguments:

* The Fed should not bail out the reckless lenders and investors who caused the credit and housing bubble in the first place.

* The Fed risks higher inflation if it eases too aggressively and the dollar falls too much.

But the job of the Fed is not to bail out investors; it is, rather, to try to bail out the real economy from a severe recession that will follow the bursting of the housing and credit bubbles. Given this bust, investors will bear massive losses regardless of what the Fed does. The Fed should now worry about a generalized financial meltdown.

During the coming recession, demand for goods will fall, jobs will be lost and oil prices will drop. Inflationary pressures will be reduced, and rising prices will become the last problem the Fed needs to worry about.

The growing glut of unsold homes, big-ticket consumer items and autos implies that Fed easing will have only a limited effect on the rapidly sinking economy. Whatever the Fed does will be too little, too late to stop the recession altogether. But this does not imply that the Fed should allow massive unemployment to emerge just to teach a lesson to Wall Street and avoid a "bailout" of investors.

Nouriel Roubini is chairman of the online publication RGE Monitor (www.rgemonitor.com) and a professor of economics at New York University's Stern School of Business.

And here is below the alternative view in this debate expressed by the editorial board of USA Today that argues that the Fed should not bailout Wall Street. I do agree with them -and have written extensively about it - that Wall Street is significantly at fault for the mess that the economy is facing now. My point is that you don't want to inflict additional and partly avoidable misery on Main Street (the millions of households who will suffer from a more severe and more protracted recession than the currently unavoidable one) just to punish and teach a lesson to the reckless lenders and investors on Wall Street. Invertors will bear massive losses (over $1 trillion based on my estimates) regardless of what the Fed does; and the stock market will have a sharp bearish drop regardless of Fed actions as recession is unavoidable. So the moral hazard critique of further Fed easing is not relevant as massive financial losses are now unavoidable. The Fed should rather start worrying about a systemic financial crisis.

Debate

Our view on markets in turmoil: Wall Street floods economy, then demands a bailout

Bankers who contributed to the mess shouldn’t cast aspersions.

Wall Street hasn't exactly warmed to Fed Chairman Ben Bernankesince he was appointed almost two years ago. At first, it found him too candid about inflation. Now it's grousing that he isn't properly signaling the Fed's intentions and, more important, is too timid in cutting interest rates. That's the view of a number of economists employed by, or at least sympathetic with, the Street's major investment houses.

This raises an important economic principle, best articulated, perhaps, in the New Testament book of Matthew: "Judge not, that ye be not judged."

Apart from the fact that the criticism is so utterly self-serving (of course banks want rate cuts, which translate into quick profits and boost the coin of the realm — stock prices), it serves to distract from Wall Street's culpability in creating this economic mess in the first place.

With the possible exception of $100-a-barrel oil, nothing is a bigger cause of Bernanke's enormously difficult task now than the behavior of Wall Street's leading companies over the past few years. With the fluidity of a Ford Pinto assembly line, they have been churning out some of the shoddiest products in the history of capitalism — bundles of toxic home loans, farcical debt ratings, and rosy assessments of virtually all leveraged buyouts.

These awful products — built on risk management decisions that were either negligent or willfully misleading — steered good capital into bad investments. They contributed heavily to the current havoc in the housing market and ruined the lives of some erstwhile homeowners. They squeezed credit markets and are prompting some investors worldwide to reconsider whether the USA is such a good bet. In other words they formed a perfect storm that rained on the parade that was once a vibrant economy.

This presents an enormous problem for Bernanke. He has had his hands full from the beginning with rising commodities prices, slowing advances in productivity, a weakening dollar and massive federal deficit spending — all of which raised the specter of inflation. Without these factors abating, the overall economy has taken a hit from declining home prices, rising foreclosures and a host of credit woes.

Now he has to act to resuscitate the economy — which will incidentally help bail out some of Wall Street's least deserving — without stoking inflation.

Maybe the Fed should have cut faster. Maybe it has some minor communications issues to work out. At this point, it's impossible to know whether the Fed has been too timid.

But Bernanke faces some of the most trying circumstances in decades. And maybe it isn't his job to accept blame for not being perfect in making up for the sins of others.

Frankly, the Fed's behavior is far less a problem than Wall Street's. In the past decade alone, a rotating cast of institutions has assisted Enron and others in hiding their fraudulent accounting, issued bogus "buy" recommendations on companies that happened to be lucrative banking clients, and papered the world with toxic debt. Call it the P.T. Barnum school of business: "There's a sucker born every minute."

Or to play on an old brokerage ad: When Wall Street talks, don't listen.