Federal Reserve

The Treasury Department will propose Monday that Congress give the Federal Reserve broad new authority to oversee financial market stability, in effect allowing it to send special forces into any corner of the industry or any institution that might pose a risk to the overall system.

WASHINGTON (MarketWatch) -- Acting quickly to prevent a run on major global financial firms, the Federal Reserve cut its discount rate by a quarter percentage point to 3.25% and offered to lend money to a longer list of firms than ever before.

Federal regulators have ordered WSB Financial Group Inc. and its Westsound Bank subsidiary to make changes regarding its past lending practices.

Global stock markets plunged on January 21 and 22, many of them taking their worst losses since 9/11 amid fears of a U.S. recession.

The US economy is on its way to recession and the crisis will last until next year, a chief economist for Standard Chartered bank says.

Central banks in Europe and North America moved Wednesday to increase the amount of money they could lend to banks and to make it more readily available in an attempt to ease the credit squeeze.

There is rising concern that the US economy will slip into recession next year dragging many economies - including Britain - down with it as the global credit crisis worsens. The Washington-based International Monetary Fund has warned of a 'perfect storm' caused by surging oil prices and the turbulence on financial markets.

Brad W. Setser, CFR’s fellow for geoeconomics and an expert on currencies, outlines the factors leading to the precipitous recent fall in the valuation of the U.S. dollar. Setser says expectations that the U.S. Federal Reserve will make further rate cuts have added to the dollar’s decline, and says more generally that some countries with large dollar reserves are becoming less comfortable sitting on these reserves. He says the Fed shouldn’t attempt to use interest rates to sway currency exchange rates, but should focus instead on guaranteeing domestic economic stability, adding that it would take a “rather extraordinary series of events” to create a situation in which the United States ought to intervene directly in currency markets by coordinating the sale of euros or yen and buying dollars.

Governments must let go of the fatal notion that nationhood requires them to make and control the money used in their territory. National currencies and global markets simply do not mix; together they make a deadly brew of currency crises and geopolitical tension and create ready pretexts for damaging protectionism. In order to globalize safely, countries should abandon monetary nationalism and abolish unwanted currencies, the source of much of today's instability.

August 16, 2007 -- THE Plunge Protection Team and the Federal Reserve saw it coming. The "it" is the turmoil in the financial markets that we've been seeing ever since the failure of some subprime mortgage securities began scaring the bejeezus out of investors.