August 29, 2007 (LPAC)--Federal Reserve chairman Ben Bernanke promised the Fed is "ready to act" whenever needed to pump more liquidity into financial markets, in a letter written to Sen. Charles Schumer (D-NY) so that Schumer could release it today. It was identical to the wording of the Federal Reserve statement of Aug. 17, when it dramatically cut the discount rate by half a point.

Bernanke's continual restatement of the same readiness to "pump"--he also allowed Sen. Christopher Dodd (D-CT) to make the same assurance on his behalf on Aug. 20--makes clear how worried Fed and Administration officials are about the wildly gyrating stock market. Yet the stock market is hardly even at the center of the problem. The Dow Jones index fell nearly 300 points on Tuesday on bad news of the deepening credit crunch; on Wednesday it rose nearly as much with Bernanke's new promises conveyed through "Wall Street Senator" Schumer.

The Bernanke letter was taken by analysts, according to MarketWatch, as a promise of a Federal Funds rate cut of at least one-quarter percent, on or before Sept. 18.

He also suggested "the private and public sectors, separately, or in collaboration, ... help the situation by developing a broader range of mortgage products which are appropriate for low- and moderate-income borrowers, including those seeking to refinance."