We were going to call this page "The Crumbling Economy" but didn't want to contribute to the alarmism that leads to a, well, crumbling economy. There's no doubt the US financial world is feeling fairly tumultuous these days - but how much the turmoil on Wall Street will have a long term impact on the rest of the economy is still an open question.

Still, the Federal Reserve (the US's lending arm which tries to keep the economy on an even keel) and Congress are not waiting to find out before intervening in ways they hope will cushion a hard crash. Through interest rate tweaks, stimulus plans, new regs and "bail-outs" they're hoping to give the economy enough bounce to avoid falling into a deep recession. Here we just keep track of their efforts.

Bailouts big and small. After stepping in to rescue progressively heftier Wall Street giants - Bear Stearns, Frannie Mae & Freddie Mac, and AIG - the Fed turned to Congress asking for the okay to finance a bailout to - hopefully - end all bailouts. Congress looks ready to comply, but only after a week of tough negotiations. A bill that could pass the week of September 29 would greenlight up to $700 billion (to be given in three installments) to buy up "toxic" debt that Wall Street firms have on their books. An oversight panel would keep track of the rescue effort and the government would get some stock in the companies they help out. CEO pay - and golden parachutes - in those companies will also be limited. (NYT, WP)

Although the bill looks like it's a bailout for irresponsible financiers, the rationale behind buying up Wall Street's bad debts is that it will ward off a credit freeze - which could push us all into a recession. With financial firms spooked by toxic securities, they are increasingly worried about extending credit to other firms; a credit freeze on Wall Street eventually translates to dried up credit for the rest of America. By taking over all those bad bets, however, a bailout hopes to give Wall Street the confidence to start lending again.

Consumerism boost: Congress passed a "stimulus" plan in early '08, doling out $600 checks to most working Americans (low income taxpayers will get $300). With checks starting to arrive in May, economists hoped consumers would hit the mall (and not the savings bank) to shoot some energy into the economy.

Earlier help from the Fed: The Federal Reserve at first played its usual economy-boosting game of lowering interest rates (which makes it more attractive to borrow and invest in the economy) to avoid a recession, but it has also started funneling money to investment houses (as short term loans) to prop up confidence among investors. The Fed has pretty much promised an open tap to financial institutions, with expectations that it will lend out hundreds of billions of dollars.

Propping up mortgages: Congress and DC regulators are also churning out ways to save homeowners from defaulting mortgages - by easing up and creating new federally backed loans - while protecting families from future risky loans. See our Housing Jitters page.

Regulating Wall Street: At least part of the current headache on Wall Street is blamed on newer, higher-risk and under-regulated ways of investing. Banks have the FDIC hanging over them to make sure they aren't going too far out on a limb (or at least making their work more transparent); many on the Hill would like to see DC also take a larger role in regulating all financial institutions. Congressional leaders and the administration have plans in the works, but no one expects any changes to be made this year - and only after many ideas are battled out. (NYT, NYT, WP, WP, WP)

Easing student loans: With the credit crunch putting the squeeze on student loans, Congress voted to open up federal lending, HR 5715, to make sure students can still pay their tuition without paying skyrocketing rates. (WP)

Updated September 28, 2008

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