WASHINGTON — The Federal Reserve slashed a key interest rate by half a percentage point Wednesday, driving it to a level seen only once before in the past half-century, and the government finally began distributing funds from the billions in the financial-rescue package.
Those efforts and others were part of a concerted drive by officials, just days before a national election, to demonstrate they are moving as quickly as possible to deal with the most serious financial crisis to hit the country since the 1930s.
“Policymakers have their foot to the accelerator, and they are using every effort at their disposal to stop the slide in the economy and financial markets,” said Mark Zandi, chief economist with Moody’s . “And it’s not a moment too soon, given the serious damage that has already been done.”
Wall Street, which the previous day posted the second-biggest point gain in history, was less impressed with Wednesday’s activity. The Dow Jones industrial average finished the day down 74 points, a drop analysts said partly reflected growing worries about whether the government’s actions will be sufficient to avert a deep and prolonged recession.
The Fed, as investors had hoped, announced a half-point cut in the federal funds rate, the interest that banks charge each other on overnight loans, driving it down to 1 percent, a low last seen in 2003-04.
Reducing the rate as low as zero cannot be ruled out, some analysts said, but they cautioned that reducing rates that far carried some risks.
Meanwhile, the administration announced that the spigot had been opened on the $700 billion fund created by Congress on Oct. 3 to rescue the U.S. financial system. Treasury issued a report showing checks had been disbursed for $125 billion in payments to nine major banks, including Bank of America, Citigroup, JPMorgan Chase, Goldman Sachs and Morgan Stanley. The goal is to bolster their balance sheets so they will resume more normal lending.
