"The next phase is almost as difficult as the first one he presided over in saving the economy from a deeper recession or worse,” says one economist.

Though sales of existing homes appear to be bouncing back— as cheap foreclosure properties attract buyers—the market for new homes is stuck below sea level.

Consumer spending, which roughly accounts for 70 percent of economic activity, and housing, about 20 percent of GDP, have been hit with the equivalent of 100-year storms.

If domestic spending has been the engine of economic growth in the past few decades, then the coming recovery — and the job creation that comes with it — won't be a smooth ride.

Consumer spending has been so shaken that it will take years to recover. And even then, the growth will be slow and painful and with subpar job creation.

The Obama administration's foreclosure relief plan is off to a slower-than-expected start,  with some of the biggest financial firms showing poor participation  rates.

Friday's GDP report is expected to show the economy shrank further in the second quarter, but many economists believe the recession has finally hit bottom.

After a year and a half of declining payrolls, economists are more certain there will be modest job creation than either a "jobless recovery" or an outright jobs boom. 

"The problem in our marketplace is the move-up market, which is basically dead," says one senator.  "People are buying bargains. There's almost no market for the average home. "

"The nosedive is over," says one economist about Friday's second-quarter GDP report.  "Nevertheless, you come out of this looking past the second quarter with a very uneven recovery picture."

In many beaten-down real estate markets, what was once a bane is now a boon, but there's considerable debate about whether it signals the coming of an overall housing recovery.

A key House committee aims to have two components of sweeping regulatory reform legislation finished by the August recess but other key parts of the package won’t be taken up until legislators return in September, according to a senior Congressional staffer Monday.

Both government and industry have experienced a steep learning curve in battling foreclosures, but two years into the crisis, greater flexibility and more effective measures are combining to produce early signs of improved results.

If anything, Goldman’s handsome profits are a barometer of the government’s bailout of the financial system, from the straight-up handout mechanism called TARP to the Federal Reserve’s less direct, but probably more beneficent, policy of rock bottom interest rates and other favorable lending facilities.

Both parties not only question the Fed’s performance but worry that the financial reforms will make the central bank even more politicized.