Monday March 17, 2008...I think it's time to worry

Just in case you haven't kept up with the latest weekend news while wearing of the green on this day of shamrocks, here is some testy news which should worry all of us:

"It seems as if Bernanke & Co. are pulling out all the stops to avoid a serious financial market meltdown," Richard Yamarone, an economist at Argus Research, said Sunday evening.

Urgently moving to contain a deepening credit crisis, the Federal Reserve is trying to restore confidence in panicked financial markets by becoming a lender of last resort for Wall Street investment houses that on Monday can begin securing short-term emergency loans.

The central bank, in an extraordinarily rare weekend move, took the bold action Sunday in an attempt to calm the markets. It also approved a cut in its emergency lending rate to financial institutions to 3.25 percent from 3.50 percent, effective immediately.

The new lending facility — described as a cousin to the Fed's emergency lending "discount window" for banks — is geared to give major investment houses a source of short-term cash on a regular basis — if they need it.

That's important because those big investment houses have key roles in the financial system and if one fails or is having difficulty it could put the whole financial system in jeopardy, said Mark Zandi, chief economist at Moody's Economy.com. These big investment houses have complex relationships with many players in the system, including hedge funds, commercial banks and others.

The lending facility will be in place for at least six months and "may be extended as conditions warrant," the Fed said. The interest rate will be 3.25 percent and a range of collateral — including investment-grade mortgage backed securities — will be accepted to back the overnight loans.

AND THIS IS HUGE:

The Fed on Sunday also approved the financing arrangement through which JPMorgan will acquire Bear Stearns for $236.2 million in a deal that represents a stunning collapse for one of the world's largest and most venerable investment houses. JPMorgan said the Fed will provide special financing for the deal. The central bank has agreed to fund up to $30 billion of Bear Stearns' less liquid assets, according to JPMorgan. (This was a financial investment firm with hundreds of billions of dollars passing through it's hands)

The Fed's actions are the latest in a recent string of innovative steps to deal with a worsening credit crisis that has unhinged Wall Street.

The action comes just two days before the central bank's scheduled meeting on Tuesday, where another big cut to a key interest rate that affects millions of people and businesses is expected to be ordered. That key rate is now at 3 percent and is expected to be cut by at least three-quarters of a percentage point on Tuesday.

Yet anxiety persisted. On world financial markets, Asian stocks plunged Monday after the JPMorgan and Fed announcements. Markets in Australia and New Zealand were also off and European stocks fell in early trading. The Bank of England moved Monday to inject an extra $10.1 billion into its financial system to provide relief.

Oil prices hit a record in Asian trading as the value of the dollar continued its free fall and U.S. stock index futures were down sharply, suggesting Wall Street would open lower after sinking Friday.

MEANWHILE AT THE FRONT:

Vice President Dick Cheney and Sen. John McCain vowed in meetings with Iraq's prime minister Monday that the U.S. would maintain a long-term military presence in Iraq until al-Qaida is defeated there.

Please note that al-Qaida wasn't in Iraq until we invaded it.