Some more "music" or real news?

The Federal Reserve and other countries' central banks announced new steps Monday that makes billions of dollars available to squeezed banks here and abroad to battle a worsening credit crisis that threatens to unhinge the U.S. economy.

The Fed said the action is intended to "expand significantly" the cash available to financial institutions in an effort to relieve to the worst credit crisis since the Great Depression. In taking the action, the Fed cited "continued strains" in the demand for short-term funding.

Central banks will continue to work closely and are prepared to take "appropriate steps as needed" to ease the crisis and get banks lending again, the Fed said.

Under one new step, the Fed will boost the amount of 84-day cash loans available to U.S. banks. The Fed is increasing the amount to $75 billion, up from the current $25 billion starting on Oct. 6. Banks bid on a slice of the loans at an auction.

Rescue plan is ready...

Congressional leaders said shortly after midnight that they had reached a tentative deal over the White House's proposed $700 billion bailout of the financial system.

Members of both parties and Treasury Secretary Henry Paulson were aiming to craft final legislation by Sunday evening - in time for the start of financial markets around the world.

"We've been working very hard on this and we've made great progress toward a deal that will work and will be effective in the marketplace and effective for all Americans," Paulson said.

Paulson made the announcement along with House Speaker Nancy Pelosi, D-Calif., Senate Majority Leader Harry Reid, D-Nev., and other legislators. They characterized the accord as an agreement in principle.

"Now it's got to be turned over to the lawyers, turned into final language," said Sen. Kent Conrad, D-N.D.

The Bush administration, in the government's boldest strike yet at the credit crisis, is seeking congressional authority for Treasury to buy as much as $700 billion in troubled mortgage and other assets weighing down banks and other financial institutions. The goal is to free up banks to start lending again.

Under the tentative deal being finalized, the rescue program would be overseen by a board including the Treasury Secretary, Secretary of Commerce, head of the Securities and Exchange Commission and chairman of the Federal Reserve, said Conrad, who heads the Senate Budget Committee.

Gas shortage approaches...

But while the current shortages can be traced directly to the two hurricanes, the severity of the problem points out a bigger issue: The U.S. has been operating for a while with razor-thin spare gasoline capacity.

In its most recent Weekly Oil Data Review, Barclays Capital pointed out that the U.S. gasoline inventory has reached its lowest level since August 1967, when demand was a little more than half its current level of 9.3 million barrels a day. At 178.7 million barrels, inventories are 21.6 million barrels below their five-year average.

Senate passes big bill...

Automakers gained $25 billion in taxpayer-subsidized loans and oil companies won elimination of a long-standing ban on drilling off the Atlantic and Pacific coasts as the Senate passed a sprawling spending bill Saturday.

The 78-12 vote sent the $634 billion measure to President Bush, who was expected to sign it even though it spends more money and contains more pet projects than he would have liked.

The measure is needed to keep the government operating beyond the current budget year, which ends Tuesday. As a result, the legislation is one of the few bills this election year that simply must pass. Bush's signature would mean Congress could avoid a lame-duck session after the Nov. 4 election.

White House spokesman Tony Fratto said the bill "stands as a reminder of the failure of the Democratic Congress to fund the government in regular order." But, he said, it "puts the United States one step closer to ending our dependence on foreign sources of energy" by lifting the offshore drilling ban and opening up huge reserves of oil shale in the West.

The Pentagon is in line for a record budget. In addition to $70 billion approved this summer for operations in Iraq and Afghanistan, the Defense Department would receive $488 billion, a 6 percent increase. The spending bill also offers aid to victims of flooding in the Midwest and recent hurricanes across the Gulf Coast.

Some bad news...

While Congress and Bush administration officials have been working to complete a bailout plan and stem the financial contagion on Wall Street, a different kind of economic crisis emerged across the South this week: A severe, hurricane-related gasoline shortage has curtailed trucking from Atlanta to Asheville, N.C., and created a wave of panic buying among motorists.

The return of gas lines has largely flown under the radar of politicians who are usually keenly attuned, because their constituents are, to what's going on at the pump. But more of the Capitol gang should be paying attention to this.

That's because nationwide our gasoline inventory is shockingly low. Liquidity must be restored soon to this market, or we could be facing a crippling run on the gasoline bank. And if you think Americans are outraged about Wall Street, wait until their Main Street grocery store doesn't get the bread and milk delivery for a week or two.

A new penny...

For the first time in 50 years, the penny is getting redesigned, with four versions coming next year to commemorate the 200th anniversary of Abraham Lincoln's birth, the U.S. Mint announced Monday.

While the coin will continue to depict Lincoln's likeness on the front, the reverse side will bear one of four new designs, the Mint said.

The first of the coins debuts Feb. 12, with the others following in three-month intervals. The release date, besides being Lincoln's birthday, comes a century after the production of the original Lincoln cent in 1909.

The Lincoln cent was the first circulating coin to feature a person's likeness, and also the first to depict a U.S. president.

A Lincoln commemorative silver dollar will also be released in 2009.

"These coins are a tribute to one of our greatest presidents...he believed all men were created equal, and his life was a model for accomplishing through honesty, integrity, loyalty and a lifetime of education," said U.S. Mint director Ed Moy.

Will the new plans work?

Experts are cautiously optimistic that the massive federal bailout of the nation's financial sector will solve the credit crisis that hit Wall Street this week.

But questions remain about whether it will prevent more failures of banks and Wall Street firms and many doubt this will lead to a quick turnaround for the battered housing market.

The broad outlines of the plan call for the federal government to buy hundreds of billions of dollars' worth of mortgage assets held by banks, Wall Street firms and other financial institutions.

Those securities were backed by home loans, many made to buyers with bad credit or without proof of income. As housing values fell and foreclosures shot to record levels in the past two years, the value of those securities plunged. That in turn caused massive losses in the financial sector.

This week it reached a crisis situation. Banks and investment firms stopped making the loans to each other as they hoarded cash to protect against any sudden liquidity crunch as well from unknown problems on their partners' balance sheets.

Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke won support for the bailout plan from Congressional leaders in a meeting Thursday night.

Friday morning, Paulson said he'll be working through the weekend with those on Capitol Hill to hammer out legislation that could go for a vote as soon as next week.

"I am convinced that this bold approach will cost American families far less than the alternative -- a continuing series of financial institution failures and frozen credit markets unable to fund economic expansion," Paulson said Friday. "I believe many members of Congress share my conviction."

Word of the plan first leaked Thursday afternoon, causing a massive rally in stocks at the end of the day that carried over into Friday. Several economists also praised the move.

"I'm confident this will work," said Mark Zandi, chief economist with Moody's Economy.com. "The federal government is committed to backstopping the nation's financial system and will do whatever is necessary to make sure the system does not unravel. The details are important but secondary."

The plan also won support from presidential candidates John McCain and Barack Obama. Zandi is an informal economic advisor to the McCain campaign.

Other experts said that while there are obviously big risks to taxpayers, the federal government has little choice but to provide the assurance to financial markets.

"If this doesn't work, we're in trouble, because there's not much more the government can do," said Jaret Seiberg, a financial services analyst at the Stanford Group. "They've left very few arrows in the quiver."

Is it really a recession?

The recession is no doubt hurting you, perhaps badly. Your sales may well be down. Maybe you've even lost your job. Whatever your troubles, you may safely blame them on the recession.

After all, most of the CFOs questioned in a recent poll agree that the U.S. is in a recession; among the general public, 76% said the U.S. was in a recession six months ago, and other polling suggests most people believe things have grown worse since then.

Federal Reserve has something to say!

The Federal Reserve left its fed funds rate at 2% Tuesday despite increased hopes for a rate cut.

Wall Street wanted a cut in order to help ease the pain in the financial sector and restore investor confidence.

The Fed's policymakers acknowledged the deepening problems facing the nation's financial markets as well as weaker economic fundamentals in its statement.

"Strains in financial markets have increased significantly and labor markets have weakened further," said the statement, making reference to the jump in unemployment to a five-year high of 6.1% in August. It also warned that softer spending by consumers is expected to slow economic growth.

But the Fed added that it believes rates are already low enough to spur future economic growth and that despite recent declines in commodity prices, such as oil, the outlook for inflation remains uncertain.

The fed funds rate is the central bank's key tool to affect the economy. Lowering the rate pumps money into the economy by reducing the cost on a broad range of loans, including credit cards, home equity lines and many business loans.

1/4 of the US fuel production shuts down...

Nearly a quarter of U.S. fuel production had been shut down due to the approach of Hurricane Ike, according to a government assessment released Friday.

By 10:00 A.M. ET, 13 of the 26 Texas refineries, representing a production capacity of 3.6 million barrels of fuel a day, had been shut down, the Energy Department said.

Texas accounts for more than a quarter of the nation's total capacity to produce gasoline and other petroleum fuels. In normal operation, facilities there can produce up to 4.8 million barrels a day, according to the government.

Most of the Texas refineries are located along the ports of Houston, Port Arthur, and Corpus Christi, where Ike is scheduled to make landfall Friday night or Saturday.

Refining facilities on land are more vulnerable to flooding and power outages than offshore facilities, according to Ray Carbone, president of oil trading company Paramount Options.

"Without power, no refineries will be working and the flooding could complicate how long it takes them to come back online," said Carbone.

Fannie and Freddie playing a major role...

During the Vietnam War, James Lockhart served as a naval officer aboard a nuclear submarine, the USS George Washington Carver. His job these days might be even more explosive.

As head of the Federal Housing Finance Agency, Lockhart is in charge of Fannie Mae and Freddie Mac, the mortgage financing titans taken over by the government on Sunday. It's up to Lockhart - armed with powers granted by Congress in July - to keep the companies functioning amidst the worst housing decline since the Great Depression.

To be sure, the next president will determine the fate of Fannie and Freddie - and in the process likely replace Lockhart, 62, a high school and college classmate of President Bush. But for now, the buck stops with Lockhart, who oversees the companies' newly appointed chief executives: Herbert Allison at Fannie Mae and David Moffett at Freddie Mac.

White Houses defends the conomy...

The White House said Tuesday that the giant federal takeover of troubled mortgage giants Fannie Mae and Freddie Mac could have been prevented if Congress had acted on its recommendations for changing the system.

"It is exactly the kind of event we warned about and tried to prevent over the years," White House press secretary Dana Perino said. "Remember that we have highlighted the systemic risk posed by Fannie Mae and Freddie Mac because of the very large role they play in housing markets and because of their business practices."

She said that the White House has asked Congress "for years" to establish a strong independent regulator to oversee the institutions.

Perino also highlighted that the takeover will allow time for Congress and the next administration to determine the appropriate future role for the companies. She said their primary mission should be to increase the availability and affordability of home mortgages.

Wall Street loves the bailout

Wall Street has been holding its breath since mid-July due to fears about the fate of Fannie Mae and Freddie Mac. Today, investors finally exhaled and started buying.

Overseas stock markets surged Monday and the Dow and S&P 500 both skyrocketed more than 2%.

It's now worth asking: Was the Dow's low point of 10,962.54 on July 15 the bottom?

"Hopefully, this bailout will be the last thing we'll need for the markets to move forward. This is a huge step in the right direction," said Ted Parrish, co-manager of the Henssler Equity fund.

And if you subscribe to the notion that the economic woes are largely due to the housing mess and credit crunch, it's hard to not be encouraged by the end of the Fannie-Freddie deathwatch.

Minimum wage debate updates...

The unemployment rate is now above 6% for the first time since 2003 and more than 600,000 jobs have been lost so far this year.

Clearly, declining house prices, the credit crunch, sky-high energy costs and the overall weakening economy is a big reason behind the deteriorating labor market.

But some also worry about the impact of increases in the minimum wage and whether they will limit job gains in the future.

Jobless people

The unemployment rate soared to a nearly five-year high in August as employers trimmed jobs for the eighth straight month, the government reported Friday.

The unemployment rate rose to 6.1%, the highest level since September 2003. That's up from 5.7% in July and 4.7% a year ago.

In addition, the economy suffered a net loss of 84,000 jobs in August, according to the U.S. Department of Labor, compared to a revised reading of a 60,000 job loss in July.

The U.S. economy has lost 605,000 jobs so far this year.

The jobs report immediately drew comment from the presidential candidates as well as the Bush administration.

The White House pointed to other economic readings, including last week's gross domestic product report. It showed second quarter growth jumping to a 3.3% annual rate, helped by economic stimulus checks and strong exports.

"While these (jobs) numbers are disappointing, what is most important is the overall direction the economy is headed," said the White House statement.

But the campaign of Democratic presidential candidate Barack Obama said the report points out the failure of Republican policies.

"John McCain showed last night that he is intent on continuing the economic policies that just this year have caused the American economy to lose 605,000 jobs," Obama said in a statement. "John McCain's answer is more of the same: $200 billion in tax cuts to big corporations and oil companies, and not one dime of tax relief to more than 100 million middle-class families."

Have you ever wondered why the FED cuts didn't work?

It's been almost a year since the Federal Reserve issued the first of what turned out to be seven rate cuts to deal with the credit crisis.

So why does the economy still seem like it's in a big funk, with banks continuing to suffer?

One of the biggest proponents of the Fed's aggressive rate-cutting spree has an explanation.

Eric Rosengren, president of the Federal Reserve Bank of Boston, said in a speech Wednesday that the low federal funds rate of 2% is providing "much less stimulus...than it otherwise would" because of the credit crunch.

The federal funds rate is an overnight bank lending rate that banks charge each other to borrow money. But Rosengren argues that just because banks are charging each other a relatively low rate, this does "not necessarily translate into lower costs to the vast majority of borrowers."

In other words, even though the Fed has slashed the federal funds rate from 5.25% to 2%, many beaten-up banks have nevertheless substantially tightened credit standards for businesses and consumers.

Rosengren said that the rate cuts have "merely offset the tightening in credit conditions created by the financial turmoil that began last summer."

Finding the stores that we love...

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Companies are making it even worse for the people...

The number of summer job cut anouncements reached its highest level since 2002, according to a report released Wednesday.

From May through August, employers said they would cut 377,325 jobs, according to employment consultancy Challenger, Gray & Christmas, Inc. That's nearly 30% more than during the first four months of the year.

The number of job cut announcements usually dips during those particular months as business slows down over the summer, Jim Pedderson, a Challenger spokesman, said.

During the summer of 2002, in the wake of the 2001 recession, companies said they would cut 378,777 positions, according to the report.

Businesses tried to cut jobs this summer as they were hit by "the double whammy of limited access to credit and the high price of oil," said chief executive John Challenger.

Why don't we prepare ourselves for the financial crisis?

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Gustav hits our economy too!

Hurricane Gustav hit the U.S. Gulf Coast on Monday with far less force than Hurricane Katrina did three years ago, but its economic bite could be worse as it hits a national economy that is far weaker than the one battered by Katrina in 2005.

Economists agree that in the long run, a major hurricane or other natural disaster can actually help lift economic activity because of insurance payments and federal assistance.

In the short-term, the destruction and the disruptions can be a hit to the economy.

EQECAT, a firm that estimates losses for the insurance industry, said Gustav could end up causing between $6 billion and $10 billion in insured losses. That amount is a fraction of the $41 billion in insured losses caused by Katrina three years ago, but still enough to make it among the ten most costly storms in U.S. history.

But even with lower loss estimates, the weakened state of the U.S. economy - suffering a housing downturn, credit crunch and job sector woes - is one of the biggest concerns of economists trying to assess the impact that Gustav will have.

"Even if it causes $10 billion in damage, that is not a huge deal for the overall economy. But it's coming on top of everything else going wrong," said David Wyss, chief economist for Standard & Poor's. "It makes it more likely the recession scenario for the end of the year."