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A $1.3 billion package of securities backed by Nissan Motor Co. auto loans became the first small piece of what Federal Reserve officials say may grow into a $1 trillion effort to unfreeze business and consumer lending.

Nissan’s planned bond sale marks the debut of the Fed’s Term Asset-Backed Securities Loan Facility, or TALF. The securities will likely price tomorrow, the deadline for investors to apply to the Fed for loans to buy the debt, according to a person familiar with the sale who declined to be identified because terms aren’t set.

The Obama administration is counting on the TALF plan to help end the credit crunch and recession, thawing the market for asset-backed securities so lenders can make new loans to consumers. The program, first announced in November, was hampered by delays as investors, dealers and issuers worked on details.

“A number of people were concerned that some glitches might not have been ironed out this week” in time to meet the first deadline for investors to apply for the Fed loans, said Malcolm Dorris, a senior partner in the securitization group at law firm Dechert LLP in New York. “Getting a deal done in March is good for the program. We are still in the wait-and-see stage.”

Investors have shunned debt backed by consumer loans as unemployment has climbed in the worst financial crisis since the Great Depression. Sales of the bonds plunged 40 percent last year to $106 billion, according to data compiled by Bloomberg, choking off funding to lenders.

Market Decline

About $2.3 billion of debt backed by auto loans has been sold this year, compared with more than $9.6 billion in the same period of 2008, according to data from JPMorgan Chase & Co.

The offering doesn’t require investors to use the TALF. It remains to be seen how many actually use TALF loans, as opposed to cash, to purchase the Nissan debt. The New York Fed’s application window opened yesterday and closes at 5 p.m. tomorrow.

Central bankers and Treasury haven’t been able to meet Fed Chairman Ben S. Bernanke’s goal of reducing consumer interest rates along with the borrowing costs paid by banks. The difference between rates on 30-year fixed mortgages and 10-year Treasuries was 2.1 percentage points as of yesterday, Bloomberg data show. That’s up from an average of 1 faxless payday loan.75 percentage points in the decade before the subprime mortgage market collapsed.

“Now we need to keep it rolling,” former Fed governor Lyle Gramley said, referring to the TALF’s start. “What is at stake is that if we don’t get the credit markets unthawed, we’re not going to have a recovery.”

Spreads Soar

The extra yield relative to benchmark interest rates that investors demand to own debt backed by consumer loans has soared amid concern that defaults will climb. Top-rated bonds backed by auto loans are trading at about 300 basis points more than the one-month London interbank offered rate compared with 65 basis points in January 2008, JPMorgan data show. One-month Libor, a borrowing benchmark, is currently 0.56 percent.

The first phase of the TALF will finance the purchase of as much as $200 billion of AAA rated securities containing loans for autos, education, credit cards and small businesses. Officials eventually plan to include other assets, including commercial mortgage-backed securities.

The Fed originally planned to start the TALF in February, then delayed the debut to ensure “all our legal and procedural steps had been taken,” Bernanke said in congressional testimony Feb. 25. On March 3, the Fed and Treasury said applications for the first deals would be due in two weeks, with loans disbursed on March 25.

Nissan Sale

The largest AAA portion of the Nissan sale maturing in 1.98 years may price to yield between about 185 basis points and 200 basis points more than benchmark interest rates, the person said. JPMorgan and Bank of America Corp. are underwriting the bonds.

Tokyo-based Nissan sold more than $3 billion of debt backed by auto loans last year, Bloomberg data show. Other auto finance companies, including World Omni Financial Corp., have indicated they plan to access the TALF. The Deerfield Beach, Florida-based lender filed a prospectus with the U.S. Securities and Exchange Commission on Jan. 12 to sell securities backed by auto loans.

Huntington Auto plans to sell packaged loans that are eligible for the TALF, a person familiar with the transaction said today. Barclays Plc is managing the sale, the person said.

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WASHINGTON – President Barack Obama issued a withering critique today of Wall Street corporate behavior, calling it “the height of irresponsibility" for Wall Street employees to be paid more than $18 billion in bonuses last year while their financial sector was crumbling.

"It is shameful," Obama said from the Oval Office. "And part of what we're going to need is for the folks on Wall Street who are asking for help to show some restraint, and show some discipline, and show some sense of responsibility.''

The president's comments, made with new Treasury Secretary Timothy Geithner at his side, came in swift response to a report that employees of the New York financial world garnered an estimated $18.4 billion in bonuses last year. The figure, from the New York state comptroller, drew prominent news coverage.

Yet Obama's stand also came just one day after he surrounded himself with well-paid chief executives at the White House. He had pulled in those business leaders and hailed them for being on the “front lines in seeing the enormous problems in our economy right now.''

The president said the public dislikes the idea of helping the financial sector, only to see the hole get bigger because of lavish spending no fax payday loans. The comptroller's report found that Wall Street employees got paid about the same amount of bonuses as they did in the boom time of 2004.

Obama said he and Geithner will speak directly to Wall Street leaders about the bonuses, which threaten to undermine public support for more government intervention. The House just approved an economic stimulus plan that would cost taxpayers more than $800 billion; the Senate is considering its own version.

Separately, Congress also passed a $700 billion plan last year to shore up the financial sector.

"We're going to be having conversations as this process moves forward directly with these folks on Wall Street to underscore that they have to start acting in a more responsible fashion if we are to, together, get this economy rolling again," Obama said.

"There will be time for them to make profits, and there will be time for them to get bonuses," Obama said. "Now is not that time.''

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NEW YORK — For years, retailers could afford to be sloppy about running their businesses because customers kept buying. No more.

Stung by the worry that shoppers — who cut spending by the most dramatic amount in at least 39 years this past holiday season — may not start spending again for a long time, stores are making drastic changes. They are cutting out marginal suppliers, hiring outside experts to keep inventory lean, holding special events for those who are still buying and making extraordinary efforts to gauge customer satisfaction.

The new discipline will be mostly good news for shoppers, who will find stores less cluttered and see an array of products at lower prices.

Of course, the downside is that consumers who want something out of the ordinary may have to look harder. Stores are rooting out offbeat, unpopular colors and styles.

Sales clerks are also checking back with customers to see if they’re satisfied with their purchases.

"We are in a sea change," said Millard "Mickey" Drexler, J.Crew’s chairman and chief executive.

Pricing goods within reach of strapped consumers also is a big focus, given the way nervous consumers have stopped shopping. Same-store sales, or sales at stores opened at least a year, fell 2.3 percent in November and December together, according to the International Council of Shopping Centers.

J.Crew is working with factories to adjust prices on items. It’s cutting inventory and expenses.

Status denim brand Rock & Republic will ship a new Recession Collection this spring that runs about half the usual $200 price tag for its jeans.

Even supermarket chain SuperValu Inc. has promised lower everyday prices on groceries and more promotions.

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Chief executives from Crate & Barrel to J bad credit payday advance.C. Penney acknowledged during the National Retail Federation meeting this month that they’re navigating new territory, predicting that the fundamental shift by consumers to spend less and save more will linger.

The biggest unknown is when or if shoppers will resume spending the way they did when the housing market was booming, credit was easy and jobs were more plentiful.

This sudden hibernation of customers is leading even the luxury retailer to try new strategies. Neiman Marcus is eliminating some vendors and focusing on serving its best customers.

Weaning customers off discounts is a big challenge for the industry, as people got used to them — particularly on luxury brands that hadn’t been discounted before sales all but dried up.

For the past two years, many of the nation’s best-run stores, such as J.C. Penney Co., had been reducing inventories in response to the consumer spending slowdown. But no one anticipated the severe retrenchment that hit in September as the financial meltdown ravaged the economy.

As shoppers simply stopped buying, stores were forced to discount as much as 75 percent off in some cases even before the official start of the holidays — resulting in the weakest season since at least 1969, when the ICSC index began.

Some companies, including KB Toys Inc., couldn’t make it through the Christmas season, and many more are expected to file for bankruptcy in the coming months. Circuit City Stores Inc., which filed for Chapter 11 bankruptcy protection in November, said Friday it will go out of business — closing its 567 U.S. stores, after not being able to work out a sale.

With no sign of the economy improving soon, merchants are preparing for times to get worse. Those who have survived face battered fourth-quarter profits and are slashing expenses and hoarding cash.

Companies like Polo Ralph Lauren Corp. are turning to outside specialists in areas like sourcing and currency hedging to reduce the impact of volatile foreign exchange rates. And they’re trying to understand the new mindset of shoppers.

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Stocks ended lower Wednesday as investors tried to shrug off a bigger-than-expected loss from investment bank Morgan Stanley, but an afternoon rally failed to hold traction.

Wall Street took a hit Wednesday in the wake of the severe losses from the nation’s second-largest investment bank, but sentiment was still buoyed by the Federal Reserve’s rate-cutting announcement Tuesday. At this point in the recession, investors are not easily flustered by yet another loss booked by a financial giant.

The Dow Jones industrial average (INDU) lost 99.8 points, or 1.1%. The broader Standard & Poor’s 500 (SPX) index ended down 9 points, or nearly 1%, and the Nasdaq composite (COMP) shed almost 11 points, or 0.7%.

Stocks started the session sharply lower and battled back to positive territory briefly, but in the final hour of the session, stocks gave back all of their earlier gains.

One analyst said that Wednesday’s volatility was in line with the market’s recent turmoil. "One thing you have to keep in mind is the volatility that we have seen over the past couple months," said Ed Clissold, senior global analyst at Ned Davis Research.

Wall Street’s sharp drop at the open was anticipated, given the big gains on Tuesday, when the Dow jumped 360 points, or 4.2%. Even if investors had not been dealing with the news of the massive Morgan losses, stocks would have snapped lower in reaction to the sharp gains on Tuesday, a market observer said.

Harry Clark, chief executive and founder of the Clark Capital Management Group, said the market "is taking bad news in stride these days." While massive financial-sector losses weigh on investor sentiment, Clark said that the market is looking for a recovery.

Clissold echoed the sentiment that the market has been braced for negative news. "When a large financial company reports bad earnings, investors for the most part treat that as what would be expected," Clissold said.

Investors were also still digesting the decision from the Federal Reserve Tuesday to cut the key lending rate to record low levels as it pledged to consider further ways to spur economic activity.

Meanwhile, market breadth was positive. Advancers beat out decliners 3-to-2 on the New York Stock Exchange on volume of 1.34 billion shares. And advancers just beat decliners on the Nasdaq, with a volume of 2.16 billion shares.

Company news: Before markets opened on Wednesday morning, Morgan Stanley (MS, Fortune 500) posted a staggering $2.3 billion loss for the fourth quarter, which was far greater than the $298 million loss that analysts were expecting, according to Thomson Reuters.

The loss was even worse than what analysts were bracing for and was yet another indication that every part of the financial sector has been battered by stock-market volatility and credit-market weakness.

The announcement from Morgan Stanley comes the day after rival Goldman Sachs (GS, Fortune 500) posted a $2.1 billion loss - the company’s first since it went public in 1999.

Fed rate cut: Wall Street’s pullback Wednesday came on the heels of a rally on Tuesday precipitated by the Federal Reserve cutting its key lending rate to the lowest level on record.

The U.S. central bank lowered its key interest rate to a range of between 0% and 0.25%. The rate cut was the 10th time the central bank has slashed rates in the past 15 months.

The central bank has attempted to juice the economy, which officially fell into recession at the end of 2007, with an aggressive rate-cutting campaign.

However, now that the key lending rate is near zero, the central bank may have to find other ways to spur the slumping economy. In fact, in the Fed’s rate-cut statement released on Tuesday, the agency indicated that it would consider purchasing its own long-term Treasurys guaranteed pay day loans.

"The Fed has really stepped up," Clark said.

He added that investors have taken comfort in the central bank’s moves, as evidenced by Tuesday’s rally on Wall Street and improvements in the credit markets.

Another analyst echoed the sentiment. "The Fed has clearly signaled it is going to do whatever is necessary to get the debt markets functioning properly again, which is going to be key for the equity markets," Clissold said. In the long run, Clissold said that a return to health in the credit markets is essential to a broader recovery.

Government debt, currencies: Long-term Treasury prices soared Wednesday, continuing Tuesday’s rally that happened in the wake of the Fed’s announcement that it would consider buying its own long-term debt.

The goal of the government in stepping in and buying its own debt would be to help the troubled housing market find some footing. Thirty-year mortgages typically move in lockstep with the yield on the benchmark 10-year Treasury note.

Lending rates continued to decline. The overnight Libor rate declined to 0.13% from 0.16% on Tuesday, while the 3-month Libor rate dropped to 1.58% from 1.85%, according to Bloomberg.com. Libor, or the London Interbank Offered Rate, is a daily average of what 16 different banks charge other banks to lend money in London.

The improvements in Libor rates are one indicator of credit-market pressures easing. "They have been coming down for the last two months and they are finally down where they should be," Clark said.

Auto bailout: U.S. automakers are still awaiting news from the Bush administration as to the status of their plea for a $14 billion bridge loan.

General Motors (GM, Fortune 500) and Chrysler LLC have warned that they are within weeks of running out of cash. After the Senate failed to approve a bailout package for the automakers, the Bush administration said it would consider tapping the $700 billion bailout fund Congress approved for the banks and Wall Street.

Meanwhile, the auto finance firm GMAC doubled the amount of capital it has raised, moving it closer to qualifying for much-needed federal funds. If GMAC can obtain enough funds to qualify as a bank, then it could obtain funds as a part of the $700 billion bailout bill.

Oil: Oil settled for the day down $3.54 to $40.06 a barrel, a 4 1/2-year low, after OPEC announced it will cut oil production by 2.2 million barrels a day as of Jan. 1 to boost oil prices. Crude oil prices have slid from record highs as the global economic recession has chipped away at demand for energy.

Oil prices have fallen nearly $100 a barrel since the record highs reached over the summer, and the cartel hopes that the production limit will stabilize oil prices.

The new production cut comes on top of a 2 million-barrels-a-day cut that was previously announced, bringing production levels down by 4.2 million barrels per day from September levels.

Other markets: In currency markets, the dollar fell to a 13-year low versus the yen and also weakened against the euro. The greenback rose slightly against the British pound.

COMEX gold for February was up $25.80 to $868.50 an ounce.

Gas prices rose Wednesday after breaking an 86-day streak of declines over the weekend, according to a daily survey of gas station credit-card swipes. The price of regular unleaded rose $0.6 cents to a national average of $1.667 a gallon from $1.661 on Tuesday, according to motorist group AAA. 

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A Democratic official says President-elect Barack Obama will name New Mexico Gov. Bill Richardson as commerce secretary.

The official says Obama plans to announce Richardson’s selection after Thanksgiving. The official spoke on condition of anonymity because the official was not authorized to speak publicly about the negotiations.

Richardson was energy secretary and U business card.N. ambassador under President Bill Clinton. Richardson would be the most visible Hispanic named to Obama’s Cabinet.

Richardson dropped out of the Democratic presidential contest in January and endorsed Obama. 

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U.S. voters are heading to the polls with stock and bond markets mired in the worst slump in three decades.

The Standard & Poor's 500 Index dropped farther and faster than any time since the administration of Gerald Ford, losing 38 percent from an all-time high last year. Corporate bonds slid the most last month in at least 32 years as bank losses topped $680 billion and consumer confidence hit an all-time low.

The winner between Democrat Barack Obama, who leads in national polls, and Republican John McCain will contend with an economy battered by declining corporate profits and the highest unemployment in five years. Concern growth is slowing sent the S&P 500 down 17 percent last month, the most since 1987.

“October was a slow-motion crash,'' said Joseph Keating, chief investment officer at RBC Private Asset Management in Birmingham, Alabama, who oversees $3 billion. “The economic reality is going to set in for whichever gentleman is elected. They'll both be looking at the worst recession since 1980.''

Stocks plunged since last year as a nationwide decline in U.S. home prices spurred record foreclosures and saddled banks with bad mortgage loans. Money markets seized up, sending the so-called TED spread, a gauge of credit-market stress, to 4.64 percentage points Oct. 10, the highest level on record.

The S&P 500's drop since its peak is the steepest for a comparable period since it declined 43 percent in the 13 months ended in October 1974, according to data compiled by Bloomberg.

Jobs, Futures

Shares fell as the U.S. unemployment rate held at 6.1 percent in September, the highest since September 2003.

Futures on the S&P 500 expiring in December gained 1.9 percent at 12:02 p.m. London time today. The benchmark for U.S. equities rose 14 percent since reaching a five-year low Oct. 27.

Investment grade corporate bonds lost 7.4 percent in October, their worst month as measured by Merrill Lynch & Co.'s bond indexes since the firm began compiling monthly data on the debt in 1976. The spread between investment grade company bonds and Treasury debt of similar maturity is the widest since 1932, according to Moody's Investors Service.

S&P 500 companies are on pace for their fifth straight quarter of declining profits, with companies from Texas Instruments Inc. to Freeport-McMoRan Copper & Gold Inc. reporting earnings and revenue that failed to meet analysts' estimates.

`Can't Do Much'

Earnings are down 8.9 percent for the 352 companies that have reported third-quarter results so far. The U.S. economy contracted 0.3 percent in the July-September period, and growth is expected to slow to 1.15 percent in 2009 from 1.6 percent this year, economists' estimates compiled by Bloomberg show.

“It's particularly likely that this new president can't do much, because they're going to get so saddled with the things they inherit,'' said Kenneth Fisher, who helps oversee over $32 billion as chief executive officer of Fisher Investments Inc cash till payday advance. in Woodside, California. “Presidents can only do so many things at once.''

Credit markets started to loosen up last month as Treasury Secretary Henry Paulson began deploying $700 billion to recapitalize banks and purchase mortgage-related securities.

The London interbank offered rate, or Libor, that banks charge each other for three-month loans in dollars slid 15 basis points to 2.71 percent today, the lowest level in almost five months, data from the British Bankers' Association showed.

`Much More Optimistic'

“You're starting to work off a lot of the risk parameters,'' said Andrew Brenner, co-head of structured products in New York at MF Global Inc. “Having this election behind us, I think the country will be much more optimistic.''

After pulling ahead of Obama in some polls following the Republican National Convention in the first week of September, McCain's support slid as the financial crisis deepened, with voters considering Obama better able to manage the economy.

Obama has an average lead of 7 percentage points over McCain, according to surveys compiled by Real Clear Politics. Obama has been ahead between 5 and 8 points since the beginning of October, the political Web site said.

Should either party have an edge in reviving the stock market, history suggests it is the Democrats.

Democratic Difference

Since 1928, the S&P 500 climbed 9.3 percent in the 12 months after the Democratic Party captured the White House, based on the median change following the election of six Democrats from Franklin D. Roosevelt to Bill Clinton.

Only once did the benchmark for American equities decline, after Jimmy Carter's victory in 1976.

Among the six newly elected Republicans, five — including Herbert Hoover, Richard Nixon and George W. Bush — preceded stock-market declines, with a median retreat of 4.3 percent for the group, data compiled by Bloomberg show. The data excludes incumbents that won re-election.

Overall, the S&P 500 generated a median 62 percent advance from the time a Democrat is elected in November or elevated from the vice presidency until the next president is chosen. For Republicans, the gain is 28 percent.

History may not be an accurate indicator this time.

“In a normal year, you would expect some kind of relief rally after the election is over with, just because we won't be talking about this anymore,'' said Brian Barish, the Denver- based president of Cambiar Investors LLC, which oversees about $6 billion. “But I would throw in that there's been nothing normal about 2008.''

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Japan's inflation slowed in September and employment prospects worsened, giving the central bank more scope to cut interest rates.

Consumer prices excluding fresh food climbed 2.3 percent from a year earlier, after rising 2.4 percent in August, the statistics bureau said today in Tokyo. The unemployment rate fell to 4 percent from 4.2 percent as job seekers stopped looking for work amid the economic slowdown.

The Bank of Japan will probably halve the benchmark lending rate to 0.25 percent today, economists say, joining overseas counterparts in lowering borrowing costs to stave off a global recession. The government yesterday promised to pump 5 trillion yen ($51 billion) into the economy to help households and small businesses cope with the fallout from financial turmoil.

“To move and cut interest rates was already a done deal,'' said Hiromichi Shirakawa, chief Japan economist at Credit Suisse Group AG in Tokyo. “It's difficult for the Bank of Japan to disregard the need for coordination with the government and the international authorities.''

There is a 60 percent chance the central bank will lower its benchmark rate a quarter point today, according to calculations by JPMorgan Chase & Co. using overnight interest- rate swaps. Fifteen of 17 economists surveyed predict a reduction, which would be the first in seven years.

Bank of Japan Governor Masaaki Shirakawa and his board came under pressure to take action after the yen surged to a 13-year high last week, driving the Nikkei 225 Stock Average to the lowest level since 1982.

Stocks Drop

Japan's currency traded at 98.36 per dollar as of 10:44 a.m. in Tokyo from 98.73 before the economic data were released and as high as 90.93 a week ago. The Nikkei snapped a three-day winning streak, falling 2.4 percent.

Household spending fell for a seventh month in September and the ratio of jobs to applicants slid to a four-year low, separate reports showed. Any relief to consumers from slowing inflation may be outweighed as weakening global demand compels companies to fire workers and cut wages, economists said freecreditreport.com.

“Companies have no choice but to lay people off,'' said Junko Nishioka, an economist at RBS Securities Japan Ltd. in Tokyo. “Profit has already started to decline.''

Nissan Motor Co. will fire 780 temporary workers at two domestic factories for large vehicles shipped to the U.S., Jiji Press reported today, citing unidentified company officials.

The number of people in the workforce shrank by 200,000 from August, today's report showed, causing the decline in the jobless rate. The number of people employed fell by 110,000, the report said, the fourth drop in five months.

In a Recession

The government last week acknowledged Japan has probably entered its first recession in six years as exports, production and spending slow.

Governor Shirakawa and his colleagues are expected to deliver their rate decision early this afternoon in Tokyo, before issuing their twice-yearly outlook for the economy and prices at 3 p.m. Fallout from the financial turmoil will probably prompt the board members to cut their inflation and growth forecasts.

Data released this month show commodity-driven inflation is already peaking. Producer-price gains slowed for a second month in September and the costs companies pay for services cooled to the slowest in two years.

Crude oil prices have halved in the past three months, and soybeans, corn and wheat have slumped after climbing to records earlier in the year.

Core prices in Tokyo, where one in 10 Japanese lives, rose 1.5 percent in October from a year earlier, after climbing 1.7 percent in September, today's report showed. Price trends in the capital tend to indicate future changes in nationwide inflation.

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The cost of borrowing in euros for three months fell to the lowest level since before Lehman Brothers Holdings Inc. collapsed as governments stepped up efforts to boost bank balance sheets and policy makers offered cash to revive lending.

The London interbank offered rate, or Libor, that banks charge each other for such loans dropped 3 basis points to 4.96 percent today, the British Bankers' Association said. That's the lowest level since Sept. 12, the Friday before Lehman failed. The overnight dollar rate slid 23 basis points to 1.28 percent, below the Federal Reserve's target for the first time since Oct. 3.

“The initiatives that governments have taken are beginning to work,'' said Laurence Mutkin, the London-based head of European fixed-income strategy at Morgan Stanley. “We're seeing a lot of improvement.''

Governments worldwide have introduced measures to shore up bank balance sheets after money markets seized up following the Lehman bankruptcy on Sept. 15. The French government will inject 10.5 billion euros ($14 billion) into BNP Paribas SA, Societe Generale SA and four other domestic banks as they tap for the first time the 360 billion-euro rescue package unveiled this month.

Interbank rates have tumbled in the past week after policy makers in Europe offered lenders unlimited dollar funding. The European Central Bank and the Bank of England today made available as much U.S. currency as required. The ECB allotted $101.93 billion of 28-day cash at a fixed rate of 2.11 percent, while U.K. policy makers loaned $26 billion.

Libor-OIS

The Libor-OIS spread, which measures the difference between the three-month dollar rate and the overnight indexed swap rate, was at 274 basis points, down from 290 basis points yesterday and 364 basis points on Oct. 10.

Overnight indexed swaps are over-the-counter traded derivatives in which one party agrees to pay a fixed rate in exchange for the average of a floating central-bank rate during the life of the swap. For dollar swaps, the floating rate is the daily effective federal funds rate.

Treasury three-month bills fell for a fourth day, the longest sequence of declines in 10 weeks, as investor appetite for the safest assets dwindled on speculation concerted global action will ease the turmoil in the credit markets. The yield rose 14 basis points to 1.22 percent, the highest in about a month.

The three-month dollar Libor slid 23 basis points to 3.83 percent today. That's still 233 basis points more than the Fed's target rate for overnight loans of 1.5 percent, up from 120 basis points about a month ago. At the start of the year, the spread was 43 basis points. A basis point is 0.01 percentage point.

`Slight Improvement'

“We see a slight improvement on the interbank market, but no breakthrough yet,'' European Central Bank Executive Board member Juergen Stark said in an interview with German radio station Deutschlandfunk payday loan cash advance loan. “There's a high risk that we'll see another incident'' in the banking sector.

The Libor is used to determine rates on $360 trillion of financial products worldwide, from mortgages to company loans and derivatives.

Barclays Plc, the U.K.'s second-biggest bank, confirmed a report by Cazenove that the lender's ability to issue unsecured funding has improved since Oct. 8, when the government announced a rescue package for financial institutions.

Rates for one-month asset-backed commercial paper fell to the lowest level in a month today. Yields on the highest-rated ABCP placed by dealers and due in 30 days dropped 30 basis points, the fourth-straight decline, to 3.45 percent, the lowest since Sept. 22, according to data compiled by Bloomberg.

TED Spread

Commercial paper is used by companies to meet short-term financing requirements.

The Fed invoked emergency authority today to purchase assets from money-market mutual funds that are having difficulty meeting redemptions from their investors. The central bank will lend to a series of special units that will buy certificates of deposit, bank notes and commercial paper with a remaining maturity of 90 days or less.

“There's plenty of cash on the table and there's plenty of money coming into the banking sector,'' said David Keeble, head of fixed-income strategy in London at Calyon, the investment-banking arm of Credit Agricole SA. “What we're finding is that confidence has been improving.''

The difference between what banks and the U.S. Treasury pay to borrow for three months, the so-called TED spread, was 261 basis points today, down from 298 basis points yesterday.

The demise of Lehman deepened a global credit crisis that froze the commercial paper and money markets, led to Goldman Sachs Group Inc. and Morgan Stanley turning themselves into commercial banks and sent the TED spread on Oct. 10 to 464 basis points, the highest level since Bloomberg began compiling the data in 1984.

The overnight Libor for dollars doubled to 6.44 percent on Sept. 16, a day after the Lehman bankruptcy filing, as banks balked at lending to each other on speculation more would fail.

In Asia, the three-month interbank lending rate for Hong Kong dollars, or Hibor, dropped for a third day, sliding 31 basis points to 3.35 percent, its longest run of declines in more than a month. Singapore's three-month rate for U.S. dollar loans slid for a sixth day, to 3.92 percent.

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The U.S. Senate passed a $700 billion financial-market rescue package loaded with inducements for the House of Representatives to approve the measure following its rejection of an earlier version.

The legislation, approved last night on a 74-25 vote, authorizes the government to buy troubled assets from financial institutions rocked by record home foreclosures. It contains two provisions favored by House Republicans: One raises the limit on federal bank-deposit insurance; the other reiterates the authority of securities regulators to suspend asset-valuing rules that corporate executives blame for fueling the crisis.

The bill's proponents cited the record 778-point drop in the Dow Jones Industrial Average after the House's 228-205 defeat of the legislation Sept. 29 as evidence of the urgency to stabilize the banking system. They suggested that the market reaction may spur some House Republicans to change their minds when the bill comes to a vote, likely tomorrow afternoon.

“The big drop'' in the Dow Index “really had a chilling effect on a lot of our members and a lot of their constituents,'' House Republican Leader John Boehner said on Fox News. With changes made by the Senate, the legislation “has a much better chance'' of passage this time, he said.

`Signal to Markets'

Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, said he hoped the vote “will send a very strong signal even to the Asian markets and others.''

The dollar rose against the euro, approaching a one-year high, after the Senate approval, bolstering expectations the U.S. will act faster than Europe to address the seizure in credit markets. The dollar advanced to $1.3883 per euro at 12:46 p.m. in London, from $1.4009 late yesterday in New York.

Asian stocks and U.S. futures fell on concern the package won't be enough to avert a recession, with futures on the Standard & Poor's 500 Index falling 1.1 percent and the MSCI Asia Pacific Index lost 1.3 percent. Europe's Dow Jones Stoxx 600 Index added 1.2 percent to 260.75 as of 12:46 p.m. in London.

The extra measures may help sway some Republicans.

“They only need 12 votes,'' Kansas Representative Todd Tiahrt, who voted against the bailout, said in an interview with Bloomberg Television. “If they put these few fundamental reforms in there,'' congressional leaders “would easily get enough votes to pass the legislation'' he said before the Senate included those provisions in the package.

Targeting Lawmakers

Democratic supporters of the bill are targeting lawmakers such as Illinois Representative Bobby Rush, who twice changed his vote in the House roll call. Rush ended up being among the 21 members of the Congressional Black Caucus to oppose the legislation. The caucus scheduled a meeting today to discuss the changes made by the Senate. Rush wasn't available to comment on his vote.

Still, House passage is far from certain.

House Majority Leader Steny Hoyer told MSNBC News yesterday that no Democrats who opposed the measure earlier this week have pledged to back it. “We don't have any more Democrats at this hour,'' he said.

Some Republicans said they also weren't budging.

“The bill that they are going to send back is the same bill that I voted against two days ago,'' Representative Joe Barton of Texas told Bloomberg Television. “Why would I turn around and vote for it tomorrow evening or Friday?''

Bush Presses for Passage

President George W no fax payday loans paydayloans.com. Bush said in a written statement after the vote that “the bill the Senate passed is essential to the financial security of every American.'' He said the House should follow suit in approving the proposal.

Bush is slated to meet with U.S. business representatives this morning, including members of the Chamber of Commerce and the National Association of Manufacturers, to urge their support in pushing for House passage, the White House press office said.

The bill was a bipartisan effort, with 40 Democrats, 33 Republicans and independent Joe Lieberman of Connecticut voting for it. The two presidential nominees, Democrat Barack Obama and Republican John McCain, returned from the campaign trail to vote for the plan.

The Senate also sweetened the measure for Republicans by authorizing the government's purchase of troubled assets with a $149 billion package of tax breaks. They would spare 24 million households from a $62 billion alternative minimum tax and extend $17 billion in benefits to companies that produce alternative energy.

Yet Hoyer warned there was a possibility that some additional Democrats may oppose the legislation because of the tax breaks, which aren't offset with spending cuts.

“There are people who are upset that we are making the deficit worse as we try to stabilize the economy,'' he told reporters. Hoyer said he was “personally disappointed' by the Senate's decision to include the tax legislation in the package.

Blue Dogs

Twenty-four of the 44-member Blue Dog Coalition of fiscally conservative Democrats voted for the rescue package on Sept. 29. Four of them said yesterday they'll continue to back the bill, even though their caucus derided the Senate's tax measures as irresponsible as recently as Monday.

“I will vote for the package coming from the Senate,'' said Oklahoma Representative Dan Boren. Other members of the coalition who voiced support included Representative Jane Harman of California, Representative Jim Marshall of Georgia and Representative Jim Cooper of Tennessee.

Added to the rescue plan this week is a temporary increase in the limit on federal deposit insurance to $250,000 from $100,000 aimed at discouraging people from pulling their money out of banks.

The Senate bill also reiterates the U.S. Securities and Exchange Commission's authority to suspend an accounting rule that bankers and other corporate executives say exacerbates their troubles.

Ease the Rule

The so-called fair-value standard requires companies to review assets and report losses if their values decline. Lawmakers, the American Bankers Association and companies including American International Group Inc. have urged the SEC to suspend or ease the rule, saying it forces firms to report deeper losses than needed on assets such as subprime mortgages.

Representative Rahm Emanuel of Illinois, the No. 4 House Democrat, said it was likely the Democratic vote total in the House will change.

“At the end of the day, I doubt we lose Democratic votes in total,'' Emanuel said. “We lose some and will pick up others. The question now will be how many Republicans come to the table to help solve this crisis.''

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Consumer confidence unexpectedly rose in September in a survey taken before the recent worsening of the credit crisis and plunge in stocks.

The Conference Board's confidence index increased to 59.8, a third consecutive increase, from 58.5 the prior month, the New York-based group said today. A separate report showed home prices fell in July at the fastest pace on record from a year earlier.

Since the confidence survey's Sept. 23 cutoff, the odds have risen that consumers will retrench in the wake of failing banks, evaporating wealth and paychecks that aren't keeping up with inflation. Stocks tumbled yesterday after the government failed to approve a financial-rescue plan.

“The environment has become pretty negative,'' said James O'Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut, who had forecast confidence would rise. “The momentum has certainly turned down. If the turmoil continues, the risk of a severe recession goes up.''

Americans are likely to lose confidence heading into the presidential election on Nov. 4. Today's report is the next-to- last Conference Board sentiment reading before the vote.

Another report showed business activity slowed less than forecast this month. The National Association of Purchasing Management-Chicago's index fell to 56.7 in September from 57.9 the prior month. Fifty is the dividing line between growth and contraction.

Stocks Up

Stocks extended earlier gains following the reports and Treasury securities fell. The Standard & Poor's 500 index was up 3.2 percent to 1,142 at 10:15 a.m. in New York. The yield on the benchmark 10-year note rose to 3.69 percent from 3.58 percent late yesterday.

Equities rallied on expectations lawmakers would salvage the bank rescue package. The House of Representatives yesterday voted down a $700 billion plan intended to restore confidence in U.S. banks, sending the S&P 500 Index tumbling almost 9 percent.

The confidence gauge was forecast to drop to 55 from an originally reported 56.9 in August, according to the median forecast in a Bloomberg News survey of 62 economists. Projections ranged from 48 to 66. The index reached a 16-year low of 51 in June and averaged 103.4 last year.

Since the cutoff date, Washington Mutual Inc. joined Lehman Brothers Holdings Inc. in bankruptcy, Citigroup Inc. acquired Wachovia Corp. to prevent the collapse of the sixth-biggest U.S. bank by assets, and stocks suffered their biggest drop since 1987.

Home Values Drop

Earlier today, the S&P/Case-Shiller home-price index of 20 U.S. metropolitan areas dropped 16.3 percent in July from a year earlier, more than forecast, after a 15.9 percent decline in June. The gauge has fallen every month since January 2007, and year-over-year records began in 2001.

“The fact that house prices quickened their slide before the worst point in credit markets hit this month does not bode well,'' said Derek Holt, an economist at Scotia Capital Inc payday loan http://us-no-fax-payday-loans.com. in Toronto.

The Conference Board's measure of present conditions dropped to 58.8, the lowest since 1993, from 65 the prior month. The gauge of expectations for the next six months increased to 60.5 from 54.1.

“These results did not capture all of the tumultuous events in the financial sector this month,'' Lynn Franco, director of the Conference Board's confidence survey, said in a statement. “Until the dust settles a bit more, we will not know the full impact.''

Jobs Outlook

Temporary shocks usually have a detrimental effect on confidence for two to four months unless they are accompanied by job losses, she said.

The share of consumers who said jobs are plentiful dropped to 12.2 percent, the fewest in five years, from 13.5 percent last month, today's report showed. The proportion of people who said jobs are hard to get increased to 32.8 percent from 31.7 percent.

Compared with other sentiment measures, the Conference Board's index tends to be more influenced by consumer attitudes about the labor market, economists said. So far this month, 466,000 Americans a week on average filed first-time claims for unemployment benefits, up from 443,000 in August and 363,000 in the first six months of the year.

A report last week showed the Reuters/University of Michigan final sentiment reading for this month declined from a preliminary figure issued in early September as the credit crisis deepened. The reading was still up from August, reflecting the decline in gasoline prices, economists said.

Payroll Forecast

The economy probably lost another 105,000 jobs in September, the ninth consecutive monthly decline, according to the median estimate in a Bloomberg survey ahead of a Labor Department report due Oct. 3. Payrolls dropped by 605,000 workers in the first eight months of the year.

Job cuts may swell as the effects of the financial meltdown ripple through other industries. Fewer jobs and less-available credit indicate consumer spending, which accounts for more than two-thirds of the economy, will weaken further.

Fewer Americans were able to obtain an auto loan this month, according to CNW Marketing Research in Bandon, Oregon, which analyzes auto-industry data.

“Given the relatively weak state of the economy, that's obviously impacting the consumer's ability or willingness to come out and buy a new car,'' General Motors Corp. Chief Executive Officer Rick Wagoner said in a Bloomberg Radio interview on Sept. 25 from Flint, Michigan.

Consumer spending this quarter will be unchanged, the weakest performance since 1991, according to the median estimate in a Bloomberg survey earlier this month.

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