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Kai Ryssdal: And this day started like so many others have this month. A twitch in the financial markets leading to a steep slide in equities.
The proximate cause this morning was Countrywide Financial. The country's biggest mortgage-lender announced it's used up its entire line of outstanding credit: $11.5 billion from a whopping total of 40 lenders. Just another indication of how tough it's getting to find spare change out there.
The official response to all the market unease so far has been, essentially, "You're on your own." Treasury Secretary Henry Paulson told the Wall Street Journal there are no guarantees when market players take risks. And the head of the Federal Reserve bank of St. Louis, William Poole, insists there's no need for the central bank to rush to the rescue with an emergency interest-rate cut.
Marketplace's senior business correspondent Bob Moon has more.
Bob Moon: When a leading member of the Federal Reserve declares, in essence, that we'll "cross that bridge when we come to it," it leaves Wall Street guessing.
Interviewed by Bloomberg News, that's what William Poole suggested — that the Fed needs to wait and see if the market can sort out its own mess.
William Poole: So let's let the market do its job and we'll do our job when we get there.
But uncertainty is something investors can't stand. And at the University of Maryland, economist Peter Morici says that kind of talk only made things worse today.
Peter Morici: Mr. Poole's comments may actually be destabilizing and panicking the markets.
Morici says the irony is, the Fed has been taking action all along. It pumped another $17 billion of cheaper money into the credit market again today.
Standard & Poors' chief economist David Wyss says Poole may insist there's no need for a rate cut, but the Fed's already delivered one:
David Wyss: Really, it is a de facto interest rate cut. You can see that by the fact that the Federal funds rate has been around 5 percent for the last few days. But the markets aren't going to trade on that unless they have a feeling the Fed's going to keep it there — not that this is just a temporary overshoot.
If the Fed insists on this kind of temporary fix, economist Peter Morici warns it could plunge the country into a recession.
Morici: They're looking across the lake and only jumping halfway, and in the process getting themselves all wet. It was correct a week ago to be pumping liquidity into the system. It is now apparent that far more is needed than that.
Morici says many Wall Street risk-takers are already ruined, but now market panic is claiming innocent victims.
Morici: There is no reason why the Ford Motor Company, or the corner grocery store, should suffer to punish the inappropriate behavior of hedge-fund managers and subprime lenders.
Morici fears the market worries won't go away until the Fed takes decisive action.
In Los Angeles, I'm Bob Moon for Marketplace.