The Federal Reserve last week made drastic moves to try to rebuild confidence in the troubled U.S. financial system.
Renee Montagne talks to David Wessel of the Wall Street Journal about reaction to the Fed's moves.
Wessel says the stock market was "a little happier" after the Fed helped sell Bear Stearns to JPMorgan at a bargain price; extended its safety net — its willingness to lend directly not only to commercial banks ... but also to Wall Street securities firms; and cut interest rates.
"All of those things coupled with some other developments in Washington helped make the indicators in the markets that people were worried about just a little bit better," Wessel says.
While the Fed has been cutting rates, there has been so much dysfunction and panic in the markets that rates that consumers pay on some mortgages, for instance, have actually gone up. Last week's actions helped bring them down a little bit, Wessel says.
"So it's not good news yet; it's just an absence of bad news. But in this climate, if you can get a few days when there's no bad news, that's really a relief," he says.
More fixes are almost certainly in the pipeline, he says. Some plans are kicking around Congress, the Bush administration and the private sector, "most of which involve buying mortgages from investors and lenders at less than face value and then using the good will and good credit of the U.S. government to refinance them," Wessel says.
Wessel describes the financial system's problems as "very frightening."
People are so anxious because this is the "most pervasive financial crisis in at least a generation," he says. When there are problems across all markets, it can trigger a kind of downward spiral that can produce a very deep and prolonged recession, he says.
"And that's why there's been so much activity at the Federal Reserve and elsewhere in Washington — to try to head that off."