(Agencies)
Updated: 2008-03-18 23:57

To those who would complain that the administration is more interested in bailing out Wall Street than struggling homeowners, Paulson said the thousands of Bear Stearns employees likely to lose their jobs and life savings, and thousands of shareholders who have lost billions because of the company's collapse, probably do not feel like they have been bailed out.

More relief is expected Tuesday when the central bank is expected to cut a key interest rate by one-half to a full percentage point.

"There is no reason for the Fed not to be aggressive," said Mark Zandi, chief economist at Moody's Economy.com. "The economy is in a recession, the financial system is in disarray and inflation is low."

However, a report Tuesday showed that wholesale prices rose by 0.3 percent in February, driven higher by rising energy costs.

Outside of food and energy, core inflation jumped by 0.5 percent, the biggest increase in 15 months and a possible sign that the relentless increase over the past two years in energy costs is making its presence felt in other sectors of the economy.

At the moment, Fed officials have said they are more concerned about weak growth than inflation. Another report Tuesday showed that problems in the housing industry continue, with construction of new homes falling by a bigger-than-expected 0.6 percent and applications for new building permits dropping to the lowest level in 16 years.

The Fed's target for the federal funds rate, the interest that banks charge each other on overnight loans, currently stands at 3 percent, down from 4.25 percent at the beginning of this year. That was before global market turmoil in January prompted an emergency three-quarter-point cut on Jan. 22 and a half-point move eight days later, the biggest reductions in a single month in more than a quarter-century.

Many economists believe the Fed will deliver another three-quarter-point cut or perhaps even a full one-point reduction at Tuesday's meetings because Fed officials will not want to disappoint fragile financial markets, which have been on a rollercoaster ride in recent days as they have watched Bear Stearns Cos., the nation's fifth largest investment house, suddenly be brought down by the equivalent of a run on the bank.

JPMorgan Chase & Co. stepped in to announce it was purchasing Bear Stearns at a fire-sale price on Sunday in a deal helped along with a pledge that the Fed would supply a $30 billion line of credit to back up Bear Stearns' assets.

   1 2 3   

   1 2 3