It's not often that the Federal Reserve works weekends, but it's also not often that one of the country's major financial institutions is on the verge of collapse. So the Fed announced Sunday that it would provide short-term emergency loans for Wall Street investment firms, along with a quarter-percentage-point cut in its emergency lending rate to 3.25 percent. These moves came right after JPMorgan, backed by the Fed, said it would buy cash-strapped Bear Stearns for $2 a share.
Treasury Secretary Henry Paulson did the Sunday talk show rounds and tried to soothe American investors. Paulson said he had "great confidence in our financial institutions." But that confidence has a clear limit: He defended the Fed's weekend action as the right decision in order to restore stability, because the situation in capital markets is "more fragile than we'd like right now."