WORLD> America
Fed orders emergency rate cut to 1.5 percent
(Agencies)
Updated: 2008-10-08 20:58

Spooked consumers and businesses have pulled back so much that some analysts fear the economy stalled - or even worse, shrank - in the July-to-September quarter. Many predict the economy will contract in both the final quarter of this year and the first quarter of next year, meeting the classic definition of a recession.

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The financial crisis that intensified in September is forcing a seismic shake-up on Wall Street.

Lehman Brothers, the country's fourth-largest investment bank, filed for bankruptcy protection. A weakened Merrill Lynch, deciding it couldn't go it alone anymore, found help in the arms of Bank of America. American International International Group was thrown a financial lifeline. And, the last two investment houses - Goldman Sachs and Morgan Stanley - decided to convert themselves into commercial banks to better weather the financial storm. The number of banks that have failed this year are up sharply from last year. On Friday, Wachovia Corp. said it will be acquired by Wells Fargo & Co. wiping out Wachovia's previous plan to sell its banking operations to rival suitor Citigroup Inc.

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