As time goes on, it seems as if the subprime mortgage crisis–and all the pain in its wake–is going to be agonizingly drawn out. As much as officials would like the fix to be quick and dramatic, it ain’t going to happen.

Rather it’s going to be like a wound dressing that can only be pulled off almost motionlessly, otherwise the wound will start to ooze all over again.

Looked at one way, this subprime fiasco is yet another of those periodic reminders that in our financial system bubbles are becoming the norm instead of remaining the anomaly.

It used to be that people understood that if something looked too good to be true that it usually was too good to be true. But no longer. Now, if something looks too good to be true, Wall Street manufactures a product that will allow people to fantasize that this time they have actually been able to grab the brass ring without any danger of falling off the merry-go-round horse.

The fantasy here on everyone’s part was that the housing market would constantly keep growing and that rising property values would somehow shield people who were getting in over their heads.

So you had all kinds of adjustable rate mortgages proliferating in the market to entice buyers who in any normal market would not have been able to afford an average house, much less one of the innumerable McMansions that have sprouted in one cul de sac after another in all parts of the country.

Thus, in the last few years, banks, home builders and investors (especially big institutional investors) took more and more risk with customers and on mortgages that were less and less riskworthy.

The promise of higher returns on these same risky mortgages drew in a universe of big institutions looking to make a killing. The wonders of modern securitization make it possible to slice and dice bundles of mortgages (and almost everything else you can think of) into an undreamt of number of tranches. And always with the expectation that the higher the risk of a particular tranche, the higher the income that could be made.

But there’s always a reckoning. So when the public’s sublime ignorance meets Wall Street’s sublime inventiveness, you’ve got to expect combustion somewhere down the line. But we don’t. It’s as if every time is the first time.

The tightening of the credit markets when the subprime crisis initially started to surface was only round one.

Foreclosures by homeowners in over their heads and unable to afford their mortgage payments when the interest rate is stepped up are likely to turn into an avalanche, according to reports.

The pain is also being felt on Wall Street in such firms as Bear Stearns and Merrill Lynch. The buzz about how big is Citigroup’s exposure is also starting to reach higher decibel levels.

Some executives who were responsible for their firms getting involved with subprime business have been cashiered, with the most noteworthy casualty so far being Merrill Lynch CEO Stanley O’Neal.

Yes, O’Neal lost his job after presiding over the biggest loss in Merrill’s many-decade history. Yet in a scenario straight out of Ripley’s Believe It Or Not, O’Neal’s pain is likely to be cushioned with a parting compensation package worth around $160 million, according to published reports.

And in our topsy-turvy world, that should hold him until he bags his next high-profile job. In the next bubble.