Fed Cuts Rate by Half-Point; 2nd Reduction in 8 Days

By EDMUND L. ANDREWS
Published: January 30, 2008

WASHINGTON — The Federal Reserve reduced short-term interest rates on Wednesday for the second time in eight days, meeting widespread expectations by investors on Wall Street for a big rate cut.

In lowering its benchmark Federal funds rate by half a point, to 3 percent, the central bank acknowledged that it is now far more worried about an economic slowdown than rising inflation, and it left open the possibility of additional rate reductions.

“Financial markets remain under considerable stress, and credit has tightened further for some businesses and households,” the central bank said in a statement accompanying its decision. In addition, it said, recent data indicated that the housing market is still getting worse and the job market appears to be “softening.”

Taken together, the back-to-back rate cuts totaling 1.25 percent amounted to the Fed’s most aggressive effort in years to head off a recession. By comparison, the Fed under Alan Greenspan reduced the overnight rate by only a half-point after the terrorist attacks on Sept. 11, 2001.

The news on Wednesday sent stocks higher on Wall Street. Within minutes after the announcement, the Dow Jones industrial average, which had been down slightly in early afternoon, was up 100 points. But it had given up all those gains by the last 15 minutes of the session.

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Gus: see toon at top... Some of my friends in financial circles think the subprime bizzo will hit several trillions of dollars... and after having inflated the values of stuff, most banks are totally "bankrupt"... Bank execs will get the golden handshake with a few hundred millions of HARD cash in their pockets for their service dedicated to greed...

Will we see the true picture one day? I hope not... as the only mainstay of our fortune relies on the illusions maintained through the storm till we can hoist the main sail again tentatively on the broken mast...

Bush hails financial rescue plan

President Bush on ''a pivotal moment'' in the US economy

The US is set to take "unprecedented measures" to tackle the crisis gripping US financial markets, President George W Bush has said.

The Treasury is proposing a fund worth up to $800bn to buy back a large proportion of the US mortgage market, media reports say.

Legislation for the plan will be pushed through as soon as possible, Treasury Secretary Henry Paulson said.

The US took action after a week of turmoil on global money markets.

The New York Times says the new fund will be used only to buy assets from US financial institutions, not from individuals.

The plan would not be managed by a new government agency but instead by investment managers specially hired by the Treasury.

Stock markets around the world have endured a roller-coaster week as traders and investors fretted about the fall-out from the current credit crisis:

    * Central banks around the world pumping billions of dollars of extra funding into money markets on Thursday and Friday to ease the liquidity crisis
    * The US announcing further measures to shore up the markets, including a ban on short-selling and guarantees to temporarily insure money market deposits
    * Stock markets around the world rallying after a dire week on news of the US rescue plans - with the UK's FTSE 100 closing with its biggest one-day gain
    * Stock markets in Russia temporarily suspended again on Friday at the end of a week of wild swings and stop-go trading
    * Banking group Morgan Stanley reportedly looking for a partner amid concerns about its future

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Ah... why don't you go and look at the cartoon at the top, here.... Eventually, the ship, having hit bottom, does not sink anymore...

September 21, 2008
A Professor and a Banker Bury Old Dogma on Markets
By PETER BAKER

This article was reported by Peter Baker, Stephen Labaton and Eric Lipton and written by Mr. Baker.

WASHINGTON — For the last year, as the nation’s economy lurched from crisis to crisis, the chairman of the Federal Reserve, Ben S. Bernanke, had been warning Henry M. Paulson Jr., the Treasury secretary, that the worsening situation might ultimately force a sweeping federal intervention.

A longtime student of the Great Depression, Mr. Bernanke was acutely aware of what could happen without a decisive move. Finally, the moment that called for action arrived late Wednesday. Less than 24 hours after the Fed bailed out American International Group, the giant insurer, it was clear the turmoil gripping Wall Street was only growing worse and that ad hoc solutions were not working.

Talking into a speaker phone from his ornate office, Mr. Bernanke told Mr. Paulson that it was time to adopt a comprehensive strategy that Congress would have to approve. Mr. Paulson understood. Reluctant in recent days to send Congress a plan that lawmakers had warned had little chance of quick passage, he had worried that a rejection would only further shock the markets. But during two conference calls Wednesday night and Thursday morning, he agreed that they had no choice.

“It just happened dramatically,” Mr. Paulson said in an interview on Friday. “There was only one way that we could reassure the markets and deal with a very significant and broad-based freezing of the credit market. There was no political calculus. It was overwhelmingly obvious.”

Just like that, Mr. Bernanke, the reserved former Ivy League professor, and Mr. Paulson, the hard-charging former Wall Street deal maker, launched what would be the government’s largest economic rescue operation in modern times, one that rivals the Iraq war in cost and at the same time may redefine Washington’s role in the marketplace for years to come.

The plan to buy $700 billion in troubled assets with taxpayer money was shaped by two men who did not know each other until two years ago and did not travel in the same circles, but now find themselves brought together by history. If Mr. Bernanke is the intellectual force and Mr. Paulson the action man of this unlikely tandem, they have managed to create a nearly seamless partnership as they rush to stop the financial upheaval and keep the economy afloat.

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gus: that's a big bailing bucket... see toon at top... note the date...

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