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Fed announces new plan to help money market funds

(Agencies)
Updated: 2008-10-22 11:45

Analysts said the stock markets were reacting with caution because they expect further turmoil stemming from credit markets that appear to be thawing, but only at a slow pace.

Traders work on the floor of the New York Stock Exchange, October 21, 2008. US stocks fell on Tuesday, hurt by a pullback in commodity shares on fears the global economy is spiraling into recession and after a rash of companies released disappointing earnings and outlooks. [Agencies]

"Interest rates and spreads have come down, but we are not anywhere close to normal," said David Wyss, chief economist at Standard & Poor's in New York.

The latest announcements came as the House Financial Services Committee held a hearing Tuesday to hear from economists and industry leaders about what needs to be done to overhaul government regulations so that the current crisis is not repeated.

House Financial Services Committee Chairman Barney Frank, D-Mass., said his panel would offer legislation in the next Congress that could be the most sweeping changes to the government's financial regulatory system since the 1930s.

"These are historic decisions being made. It is as important a set of economic decisions I think this country will be making since the Depression," Frank said.

Democrats in Congress are also pushing ahead with efforts to assemble a second economic stimulus program that could total $150 billion or more, a proposal that got a timely endorsement on Monday from Federal Reserve Chairman Ben Bernanke, who warned that the country could be facing a pronged stretch of economic weakness.

White House Press Secretary Dana Perino told reporters Tuesday that the nation would probably "see a lot of tough times ahead." She said the administration would consider proposals for increased economic stimulus, but that ideas put forward so far by Democrats were more "campaign talking points" than legitimate efforts to bolster the economy.

"Right now, what we're focusing on is the urgent crisis at hand, which is to stop the bleeding, the get rescue package implemented so that we could unfreeze the credit markets," Perino said.

Democrats say any stimulus bill would include items previously rejected by Bush such as road and bridge construction money, and help for state budgets. Another round of tax rebates is possible, too, to make the measure big enough to jolt the economy, which many economists think has already slipped into recession.

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