Economic Crisis

The U.S. Federal Reserve Sunday cut the Fed's discount rate by a quarter point to 3.25% and announced a new lending facility designed "to improve the ability of primary dealers to provide financing to participants in securitization markets."

The interest charged in this lending facility will be at the discount rate, according to a statement from the Fed. The discount rate cut means it will only be a quarter point over the fed-funds rate of 3%.

The Fed also is broadening the type of debt it will accept as collateral in the lending facility. The Fed said such loans can be collateralized by a broad range of investment-grade debt securities.

The Fed said it took the measures "to bolster market liquidity and promote orderly market functioning," according to a statement.

The facility will begin on Monday -- and the maximum period for such loans will be extended to 90 days from 30 days.

The Fed also said in its statement that it approved the recently-announced financing arrangement announced by J.P. Morgan and Bear Stearns Cos.

from the WSJ

Ben Bernanke and the boys at the Fed are in full panic mode. Bear Stearns, a major investment bank on Wall Street, lost 47% value Friday and was purchased at $2/share Sunday. The Fed cuts rate 0.25%, ahead of a meeting on 3/18. People were predicting 0.50% to 0.75% cut. That will still happen. The dollar could see a major drop coupled with a huge increase in oil.