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Tuesday, March 18th, 2008 -- 11:58 AM

These are interesting economic times and the Federal Reserve is playing a more proactive role than ever before to try to stem a deep recession, according to a local professor.

"I've been watching that with great interest," says Wayne Carroll, Professor of Economics at UW-Eau Claire, "This could be a possible historic event."

Carrol refers to the Central Bank stepping in to help bailout venerable investment firm Bear Sterns, which collapsed in a matter of days due to their exposure to the sub-prime mortgage market. The move has been called "unprecedented".

While many economists applaud the Fed's action as being necessary for short-terms stability, Carroll says there are differing views of the long-term impact of the bailout: it could lead to increased inflation, increased risk-taking and huge costs to taxpayers.

"In the late 80s in the Savings and Loan crisis, taxpayers in this country ended up really holding the bill for the crisis," Carroll remembers, "That price tag came to many, many billions of dollars."

The Fed was expected to chop interest rates yet again on Tuesday, but don't expect it to lead to lower rates for consumers.

"A little bit of that money might end up spilling over to long-term credit markets?it might have an impact on the mortgage market?but it won't have much impact on that. This will mostly impact short-term interest rates," Carroll predicts.

Carroll has been a professor of economics for three decades and says this is easily one of the most interesting economic cycles he's witnessed.

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