Fed Poised to Cut Interest Rates Again Fed Poised to Cut Rates Aggressively As It Combats Weak Economy and Severe Credit Crisis The Federal Reserve is expected to aggressively lower interest rates in its intensified battle against the credit crisis and spreading economic weakness. The question is whether all of the effort will turn the tide. Federal Reserve Chairman Ben Bernanke and his colleagues have already been working overtime, employing a variety of novel approaches to keep the economy out of a recession or at least moderate the impact of any downturn.
Bernanke May Cut Benchmark Rate by Most Since Volcker Federal Reserve Chairman Ben S. Bernanke may be readying the deepest interest-rate cut in a generation as the central bank struggles to prevent a meltdown in financial markets and a recession. Traders predict the Federal Open Market Committee, meeting today in Washington, will lower the overnight lending rate by a full percentage point or more, based on futures prices in Chicago. That would be the biggest reduction since 1984, when Paul Volcker led the central bank, and would bring the benchmark rate down to 2 percent. The Fed took emergency steps over the weekend to stave off a financial panic, lowering its rate on direct loans to banks and becoming lender of last resort for Wall Street's biggest dealers in government bonds.
Citigroup And Lehman Will Disappear The story is the same every decade or so. Bad economic times cause well-known businesses to fail. They are bought out and merged, and they simply cease to exist as the public and investors knew them for decades. After the 85-year-old Bear Stearns (BSC) went the way of all flesh, rumors surfaced that Lehman Brothers (LEH) or Citigroup (C) might be next. If things get bad enough, either one might get sucked up into another company. Rogers Blasts Paulson, Bear Stearns Bailout You can add Treasury Secretary Henry Paulson to the list of U.S. economic officials who don’t measure up in the eyes of investment guru Jim Rogers. He thinks Federal Reserve policy is turning the dollar into a toxic currency and finds it laughable that Paulson publicly voices support for the greenback while the Fed is debasing it.
Wall Street Woes May Force Bush to Assert Bigger Role in Market The accelerating crisis in U.S. financial markets may pressure the Bush administration to abandon its reluctance to act more aggressively to avoid a meltdown. President George W. Bush and Treasury Secretary Henry Paulson so far have responded to the upheaval by proposing a series of voluntary measures. The collapse of Bear Stearns Cos. amid a credit crunch and the near certainty of a recession are likely to prompt Paulson to get Bush to embrace a more activist approach, Democratic lawmakers say. "Paulson will tell him what to do,'' said House Majority Leader Steny Hoyer of Maryland, who has spoken recently with the former chairman of Goldman Sachs Group Inc. "Paulson gets the depth of the problems.'' Industrial Output Suffers Steepest Fall in 4 Months U.S. industrial production dropped at the sharpest rate in four months during February and the nation's mines, factories and utilities ran at their slowest rate in more than two years, the Federal Reserve said on Monday. Total industrial output fell 0.5 percent in February — much steeper than Wall Street economists' forecasts for a 0.1 percent decline - after rising a slim 0.1 percent in January. It was the biggest drop in monthly output since a 0.6 percent tumble last October.
Fed Becomes Lender of Last Resorts The Federal Reserve is urgently moving to contain a deepening credit crisis and restore confidence in panicked financial markets by becoming a lender of last resort for Wall Street investment houses, which were able to secure short-term emergency loans beginning Monday. On Wall Street, investors remained somewhat skittish. The Dow Jones industrials, which were down more than 175 points in early trading, moved into positive territory later in the morning. Trading on world markets was down sharply.
U.S. Housing Starts Probably Fell to 17-Year Low in February Builders in the U.S. broke ground on the fewest houses in 17 years last month as the real estate recession showed no sign of abating, economists said ahead of a government report today. Residential starts fell 1.7 percent to an annual rate of 995,000, according to the median of 64 economists surveyed by Bloomberg News. Permits, a gauge of future building, probably fell to a 1.02 million pace from 1.061 million in January. The Federal Reserve, which is forecast to cut its benchmark interest rate by a full percentage point today, is struggling to stem a meltdown in financial markets that is damaging the economy. Stabilization in housing may be difficult to engineer as property values fall, while lenders tighten borrowing rules and keep mortgage rates elevated.
Owners go to extremes to sell homes in slow market GIMMICKS GRAB BUYERS' INTEREST, BUT PRICE SELLS Frustrated as her house languished on the market for three straight summers, J.J. Rodgers is trying a new sales tactic: giving the two-story home away in an essay contest. Already, she's received more than 500 entries - each essay requires a $100 entry fee - for her four-bedroom home in Red Feather Lakes, Colo. She's hoping for a minimum of 2,000 entries, or $200,000 in fees, by the May 25 deadline to pay off the mortgage, cover closing costs and have a little left over. Rodgers last listed the property at $169,000 after cutting the price three times. "We don't have anything to lose," said Rodgers, 45. "If we're unsuccessful, at least we did something different from what we've already tried."
China Increases Bank Reserve Ratio to Cool Inflation China told banks to set aside more reserves for the second time this year, hours after Premier Wen Jiabao said the government will take "forceful'' steps to damp inflation at an 11-year high. Lenders must place a record 15.5 percent of deposits with the central bank, up from 15 percent previously, the People's Bank of China said in a statement on its Web site today. The increase will take effect on March 25. China will tackle soaring prices with "appropriate and forceful'' measures, Wen said at his annual press conference at the end of the National People's Congress in Beijing. Stocks tumbled the most in seven weeks on concern China's battle against inflation will slow the economy, which expanded 11.2 percent in the fourth quarter.
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