What happened
President Bush praised the Federal Reserve on Monday for taking unprecedented, sweeping steps to stave off panic in financial markets after the collapse of investment bank Bear Stearns. The Senate’s Democratic majority leader, Harry Reid, accused Bush of bailing out Wall Street “at taxpayer expense” while doing little to help individual homeowners facing foreclosure. (The New York Times, free registration) Fed policymakers are meeting today, and economists expect the central bank’s biggest rate cut since 1982 as it tries to help the economy through what could be the worst financial crisis in decades. (Reuters)

What the commentators said
The Fed’s “dramatic intervention” prevented a meltdown over Bear Stearns, said David Ivanovich in the Houston Chronicle, “but the balm may not soothe other wounds in the U.S. economy.” Economists are “more and more” coming to the conclusion that nothing the Fed Chairman Ben Bernanke does can prevent the nation from slipping into recession, because we’re already there.

“It's said that we're in the worst financial crisis since the Great Depression,” said Robert Samuelson in The Washington Post (free registration). “Maybe.” But this crisis is “more mystifying” than “its predecessors,” including the S&L crisis of the mid-1980s, and the the 1997-98 Asian financial crisis. This time, “it involves the entire financial system.” Nobody has a clue how bad it will get, or whether the Fed is only making matters worse by spewing out money and credit, weakening the dollar, in an attempt to restore calm.

“We do seem to have reached some Bernanke-era consensus,” said David Brooks in The New York Times (free registration). Everyone wants to bail out somebody—the disagreement is over whether to extend the favor to institutions or individuals or both. “In normal times, the free market works well. But in a crisis like this one, few are willing to sit back and let the market find its own equilibrium.”

The Fed’s “new risk-taking is an extraordinary expansion” of its “traditional crisis role,” said The Wall Street Journal in an editorial. The Fed had to guarantee $30 billion in Bear’s mortgage-related loans to clear the way for J.P. Morgan Chase to buy it, even at a fire-sale price. This means that the Fed could take a hit if the loans go bad—something that hasn’t happened before. And if things get worse, “Wall Street pressure will build for the Fed to buy up mortgage securities wholesale. This could end up ruining the Fed's balance sheet,” and then the trouble will really begin.