NEW YORK – For months, Americans have been subjected to a sort of economic water torture – a maddening drip of bad news about jobs, gas prices, sagging home values, creeping inflation, the slouching dollar and a stock market in bumpy descent.

Then came Bear Stearns. One of the five largest U.S. investment banks nearly collapsed in a single day before the government propped it up by backing emergency loans and a rival stepped in to buy it for a paltry $2 per share.

To the drumbeat of signs that seemed to foretell a traditional recession, this added a nightmarish specter – an old-style run on the bank, customers clamoring to pull their cash, a stately Wall Street firm brought to its knees.

The combination has forced the economy to the forefront of the national conversation in a way it has not been since the go-go 1990s, and for entirely opposite reasons.

As economists and Wall Street types grope for historical perspective – which is another way of saying a road map out of this mess – Americans are nervously wondering about retirement savings, interest rates, jobs that had seemed safe.

They are surveying the economic landscape and asking: Just how bad is it?

They are peering over the edge and asking: How far down?

And the scariest part of all? No one can say for sure.

Even before the crippling of Bear Stearns, the U.S. economy was acting as a slowly tightening vise – an interconnected web of factors combining to squeeze Americans from all sides. Signs of the pinch are showing up everywhere:

-By the end of 2007, 36 percent of consumers’ disposable income went to food, energy and medical care, a bigger chunk of income than at any time since records were first kept in 1960, according to Merrill Lynch.

-People are treating themselves less often. The National Restaurant Association says 54 percent of restaurants reported declining traffic in January, and the government says eating at home increased last year.Understanding how things got so bad means rewinding to the start of the housing boom. Wall Street and the banks made it far easier for people with shaky credit to get a mortgage – known as a subprime loan.

Investors wanted a piece of the fast-growing mortgage pie, so there was plenty of money sloshing around the market to pay for the loans.

Financial firms sliced up the mortgages and sold them as complex investments, finding eager buyers among pension funds, hedge funds and more who were chasing higher returns and willing to overlook risks.

As long as housing prices went up, the strategy worked. When they began to crumble, so did financial stability.

The same people who made a financial stretch to buy their homes are now defaulting on the loans at alarming rates. Many are “upside down” on their loans, meaning they owe more on their mortgages than their homes are worth.