here's how it works: the fed will sell short-term u.s. treasury bonds, replacing them with longer-term ones, creating a "twist" in rates. to help the mortgage market, it will continue buying mortgage- backed securities. operation twist is a $400 billion program lasting through june. the fed also said today it's keeping its key interest rate near 0%, saying there are "significant downside risks" to the economic outlook. three fed policymakers voted against the twist. the stock market twisted too. the dow tumbled 283 points, the nasdaq lost 52 and the s&p dropped 35. investors were troubled by the fed's pessimistic view of the economy. in the bond market, long-term rates fell to their lowest level in 60 years. the 30-year now stands at 3.01% and the yield on the 10-year fell to 1.87%. suzanne pratt takes a closer look at the fed's decision and how it's being viewed on wall street. >> reporter: the federal reserve is not in the business of disappointing this place, but here at the new york stock exchange today, investors weren't happy with t

and the fed is filling ben bernanke he is failing at his job in providing price stability and wage wage stability in america and he's trying to turn as you point out junk into something that will provide collateral for a banking system that's collapsing and the market is saying we recognize that you're a fool ben bernanke and we're crashing well this quote comes from alan blinder a professor at princeton university in the as a former vice chairman of the fed and he said through operation twist bernanke he is throwing sticks and stones and peashooters and b.b. guns and whatever he's got at the weak economy in the effort to make marginal improvements i don't expect any miracles from it and frankly neither do they so max we see this that often we see this junk shot over and over in the last two or three years as the whole financial system collapses but as all of our systems class we saw the junk shot in the gulf of mexico with b.p. we saw the junk shot at fukushima yes the junk bonds have been replaced with actual junk from the junk yard and the problem is this operation twist which for vi

economy in the global economy i mean are we asking too much of the fed right now. the federal reserve should focus on one thing and one thing only which is to maintain a stable dollar european central bank actually has the right idea they have a single mandate now they're not maybe not doing a great job of it but their single mandate is to preserve the value of the euro we have what's called the dual mandate in the united states where the fed is supposed to somehow preserve the value of the dollar but also be an economic manipulator and somehow try to generate more employment and more growth and that's where we get these easy money policies and things like that which of course as we've already discussed go really work or if they do work they give us inflation which of course is actually a net negative in the long run so the problem is the legal dual mandate isn't that's a problem but the real problem is that the politicians and the central bankers can't resist the temptation to try to artificially goose the economy there's always this pressure to artificially lower

the fed will give them twenty billion dollars for the same. that's inherent problem with the american global economy the banks privileges with these central banks where they can give them anything whether it has value or not and the fed gives them trillions and trillions of easy credit so yes we're in this position and the next headline reads max the fed disappointed the great collapse is here this is from phoenix capital research on their site gains pain and capital so the fed disappointed with this four hundred billion dollar q.e. . light it's not really q e three it's operation twist but the most striking thing the thing that upset the markets and sent everything down a wild spiral was that the fed downgraded its view of the economy stating that quote there are significant downside risks to the economic outlook and so for some reason the same guy with this piece shooters and b.b. guns and and all sorts of junk as we have here. some reason these people believe his now prognosis that it's all looking bad as if the last three years as we've be

comes from alan blinder a professor at princeton university in these a former vice chairman of the fed and he said through operation twist bernanke he is throwing sticks and stones and peashooters and b.b. guns and whatever he's got at the weak economy in the effort to make marginal improvements i don't expect any miracles from it and frankly neither do they so max we see this that often we see this junk shot over and over in the last two or three years as the whole financial system collapses but as all of our systems class we saw the junk shot in the gulf of mexico with b.p. we saw the junk shot at fukushima yes the junk bonds have been replaced with actual junk from the junk yard and the problem is this operation twist which for viewers who may be joining us late this is an attempt by the fed to force down long term interest rates by selling the short term paper usually it's the other way around so that's why they give it the same twist why because interest rates are zero already so they're digging deep into their bag of tricks to try to keep rates at zero of course rates at zero zer

or you know will get congress to change the laws of the fed and to some extent fed of fed independence is already over i want to thank you for joining us tonight and had an opinion for that at the line thank you thank you. i still ahead tonight he's been targeted by gay activists for his hateful comments for years now his presidential candidate wants to censor the web to clear his name going to be more of that thanks to all times that they had a happy hour now everybody is pleased with ben and jerry's twenty dollars ice cream flavor plus a campaign ad by rick perry that's a little bit over the fact. that only a military mechanisms if you don't work to bring justice or. i have every right to know what my government should do if you want to know why i pay taxes. i would characterize obama as a charismatic version of american exceptionalism. you know sometimes you see a story and it seems so sleep you think you understand it and then you did something else here so you saw the part of it and realized everything you saw. i'm trying hard look at the big picture. let's not forget that we have

or you know will get congress to change laws of the fed then to some extent fed the fed independence is already over i'd tell him to thank you for joining us tonight. at ten and for that at the new line thank. thank you. all right still ahead tonight he's been targeted by gay activists for his hateful comments for years now his presidential candidate wants to censor the web to clear his name going to be more of that trifold time segment going to have a happy hour or anybody is pleased with ben and jerry's assured involves ice cream flavor as a campaign ad by rick perry that's a little bit over the track. into that only a military mechanisms do don't work to bring justice or accountability. i have every right to know what my government should do if you want to know why i pay taxes. but i would characterize obama as a charismatic version of american exceptionalism. you know sometimes you see a story and it seems so for like sleep you think you understand it and then you've lived something else here's some other part of it and realized everything you thought you knew you don't know i'm

it hinges on what the fed said yesterday. the fed announced operation twist.stimulus for the market, but what investors and market participants are saying, these days, it's not about what the fed or government can do to make things better, it's they have to do things so that it doesn't get worse. the fed also yesterday, three keywords everyone's talking about. significant downside risks facing the u.s. economy. banking stocks. most everything is down. banking stocks, financial stocks really getting hit as are the big, heavy cyclical stocks, the companies that do better or worse depending on how the economy's doing in general. >> thanks so much. let's go to washington now and the threat of that new government shutdown. it was a tense round of voting and lawmakers in the house rejected the spend iing bill. it's a move that surprised even the republican leaders. kate bolduan's been talking about that from the hill. the government due to run out of money at the end of the month. tell us about the inner workings here behind the scenes. >> house leaders are scrambli

what did the fed actually do?okay, well as you know the federal reserve manages the economy usually by raising or lowering its short-term interest rate and thereby making people who spend more, spend less am but that short-term interest rate has been at zero basically since the end of 12008 so they have lost their ability to help the economy through conventional means. since then they have been trying to help by pushing down long-term rates that affect mortgages, for example, an borrowing rates of companies. they first did it through quantitative easing. they bought trillions of dollars of bonds and paid for them simply by printing money out of thin air. but there was a lot of negative reaction to that not just on capital here but in other yeses. so yesterday the fed did something slightly different. they said we're going to go out and buy $400 billion of long-term bonds, again with the intention of pushing up their prices, pushing down their yields and lowering everybody's borrowing costs. but instead of paying f

partly, not because of what the fed did but because of what the fed is saying.e saying they are seeing stresses in the global financial system. they're referring to europe specifically. that's a worry for wall street. we're watching the british banks, the french banks, the italian banc banks and the greek banks very closely. the fact the fed acknowledged that's an issue is a problem for wall street. that's why you're seeing interest rates move down and wall street also move down on the trading session. now down about 92 points. >> i have to get the information that i think you have on bank of america and moody's and their rating. what's the latest? >> bank of america's rating has been downgraded by moody's. they basically cited that fact there are decreasing odds the government would come in to support bank of america if needed. so they cut the rating on bank of america. bank of america has fired back and said they think that that ratings cut is unwarrant. moody has cut the rating on wells fargo. it is complicated but moody's is seeing stresses in both those bal

the fed were expecting markets to extend the purchase of u.s. treasuries known as the operation twist after a similar move back in the '60s. but markets were also hoping for something a little extra, a twist and a turn, if you will, as the markets were saying that the fed's move was maybe not enough really to boost the economy after some of the steps that it's just taken. and the financial sector really reflected that. it was the heaviest hit sector in the u.s. we're going to be watching out for stocks here as well. that's followed the fomc meeting and followed downgrades of three major u.s. banks, bank of america, wells fargo and citigroup. bank of america was down by 7.5%. you can see the market reflecting on those moves there. now moving on to currency markets, the yen remains strong against the basket of currencies, and especially against the dipped under 104, currently trading just around 104 yen levels. and it was trading below that during new york stock trading and earlier in tokyo as well. as i said, they're now around 104. sticking to t

i do the fed is not done yet.ral banks the world over of trying to carry a very fragile recovery in the developed economies. >> in the world we live in, three of us live in, we're talking about the fed and what the fed could do to operation twist, central banks do to keep dollar borrowing in europe and the like. here in this country people talk about what president obama, what he's doing, he alone, his handling of the economy. a lot of people say he's doing a better job of handling the economy than congressional republicans when lou at polls. they hold president bush more responsible than president obama in the mess we're in. in making a case for others that blame the economy, has the president left the impression with voters no one is at the wheel in washington preventing the economic bus from going off the cliff? >> i think to the contrary and to his own detriment, the president said a while back, hey, if i don't begin to turn this economy around, bring this deficit down, if i don't do the following things, i'm

what more could the fed do politically, a lot on the right questioning what the fed has done so far.more tools does it have in its toolbox? >> two things they could emphasize purchases of longer term securities driving rates down further. number two, this is very controversial, i think they will at least debate the idea of getting more liberal on their inflation target. >> diane, what do you think. >> i think i agree with greg, we could see "operation twist" named after -- originally done in 1961 after chubby checker's version of "the twist" is to get that twist in duration, the longer term thing. that's what we're seeing priced to market. the fed may disappoint in this meeting in september. i'm a little hesitant, although there's many people who want to go for it. dissenters are still allowed and may take until november to do it. i think they will do it, they will do "operation twist" as greg mentioned, buying longer term securities. in terms of large scale assets changing inflation target, i don't think that's on the horizon, just too risky for the hawks at the fed to stomach. i do

up and us seen dead it is the people of afghanistan it is their people are fed up. who have defeated them totally in their water of liberation and now they are at the point where one is down will be free sure will be the people are fed up generally let me. out of the regions and not far away it's middle east where the spring the revolutions as these call it know the spring revolutions in the middle east what's happening in egypt and libya and yemen and syria do you think that this revolution affects their what's happening in the south asia from developments well for a lot. of the muslim world to two hundred a day the first invasion by just four years done by the americans during their bid to country. their fight there you really dated levanon and. when. you see in totality they impact of all the even to my mind is the impact of water war two there. i would cheer all. new. one additional army global islamic resistance. which are for de guindos whole huge for them out of afghanistan which is fighting again dominic and and the europeans have defeated them in a funny. y

how does the fed become a colony of crony capitalism is basically the idea that the free market really doesn't. you know drive things after all and that very powerful interest groups get ahold of the tools of government the tools of public policy and bend them and. direct them towards their own private gain and those tools are both the budget tools the tax laws lots of other things that we can talk about but it's also the central bank in the money printing process and the intimate relationship that exists day by day between the central bank or the federal reserve system and wall street so i think the worst crony capitalism in america is in the financial system and its control over both the federal reserve and the congress and the white house and what you might call the washington count really are sounding like bernie sanders. you know you comment at this from different directions but it is not valid capitalism when you have firms that made huge mistakes in two zero eight and then get bailed out like a sore like goldman sachs or like morgan stanley or like the other financial institutio

the fed says the aim is to put downward pressure on long-term interest rates. the committee added that it will reinvest profits from matured real estate-backed securities in the market to continue its supply of funds. >>> for a closer look at those moves by the federal reserve, we spoke to michelle mayer, senior u.s. economist at bank of america/merrill lynch global research. >> an active operation twist through the middle of next year is significant. the timing i think is particularly important because it shows that the fed believes the economy will continue to warrant accommodation through the middle of next year. so they're preparing for a pretty weak trajectory of growth. i also think that types of purchases that they decide to do is significant. it's a much longer duration than we would have thought. so they're really trying to flatten out the curve. even with today's fed action i still think the economy warrants additional support from the fiscal front. however, i think it's very unlikely we'll see significant action given the debate that's happening in w

to do more i think that the fed is out of bullets i don't believe that the fed has the ability that the central banks have the ability to stem what appears to be more and more a systemic bank crisis and i think that that's the real concern that the markets are trading right now that's what they're feeling their concern specifically about europe but this is a global banking crisis because you have debt buildup in the united states you've had a buildup in the e.u. and also in asia china is in a huge bubble and investors like jim chanos of cynical investors of can it wasn't lessers and short china a lot of other people are you're not hearing people be worried about a chinese banking crisis you hear concerns about a european banking crisis and what impact that could be on the u.s. right because the chinese banking sector is part in part it's part and connected with the chinese government so better no it isn't the u.s. is baking right at the moment of the exactly the more you you combine the two the more you hide mal investment and you hide under performing or non-performing assets so th

so what can the fed still do? as we continue our look at fixing the economy, we'll ask paul reilly, c.e.o. of raymond james. home builders are still extremely pessimistic about the housing industry. a new survey shows confidence fell to a three-month low as prospective buyers, sales and purchase expectations declined. the market index of the national assocation of home builders fell one point, to 14, from its august level. readings below 50 mean more builders view market conditions as poor. the index has not been above 50 in more than five years. speaking of housing, expect higher lending fees from mortgage buyers fannie mae and freddie mac. their regulator said today the government-controlled firms are expected to gradually raise the amount they charge lenders in the next year. that would reduce the companies' long-term exposure to risk. fannie and freddie do not make loans, but they buy them from lenders and package them into securities that are sold to investors. they charge a guarantee fee when they buy mortga

do you expect the fed, should the fed try to do something and do you expected fed to somehow get involved in any european bailout for fear of what a collapse there could end up doing in terms of our own economy? >> no question that the bad jobs numbers put a lot of pressure on the fed. t the fed has been creative innovating the economy. if europe starts to go down it will take a lot of fed money to fix things. the fed will absolutely have to weigh in in the next few months or decide they have to. whether they should is another question. if you go back and look at chairman bernanke's speech, he's saying, guys, politicians in washington, you got get fiscal policy in order because monetary policy is running out of ammo. almost crying for help. maybe we'll see with obama's speech he'll start to get it, but i'm not so sure. if he doesn't we'll see more quantitative easing. >> kevin and peter, thanks for your outside the box thinking on jobs. obviously we'll look with you eyes on the president's proposals coming up next thursday. thanks for joining me today. >>> coming up, battle of the super r

of fed money into the financial system that of that is actually undermined and harmed our economy and created huge windfall gains for a very small number of people and speculators and hedge fund investors and so typically when one thinks of crony capitalism one thinks of. lobbyists or some variation of their of saying to a politician hey you know pass this but like with they're all i say you know or i'll put this highway by my office building office building goes up in value. how does the fed become a crony crony capitalism is basically the idea that the free market really doesn't . you know drive things after all and that very powerful interest groups get ahold of the tools of government the tools of public policy and bend them and. directly on towards their own private gain and those tools are both the budget tools the tax laws lots of other things that we can talk about but it's also the central bank in the money printing process and the intimate relationship that exists day by day between the central bank or the federal reserve system and wall street so i think the worst crony cap

analysts say it's in response to the fed's fear of a second recession. the fed's plan so far has been to lower interest rates, but that may not be

the feds are calling anonymous a national security threat. the fbi recently rated 75 organizations, and arresting 16 people in connection with the hacking job of the online financial service company paypal. fourteen of those arrested are thought to be from here in the bay area. court documents reveal anonymous is planning three more big jobs, including threatening to shut down facebook over what they're citing as privacy concerns. now for tonight's commute, bart hasn't said what they plan on doing, but they have recommended 501.org for commuters to check out as alternatives for their commute home. >>> on one of the busiest expressways in san jose, but work is about to begin on a very big project to ease congestion. we explain what's being done and how long the construction is going to last. good morning, stephanie. >> reporter: good morning, grace. it will take a while. here off the expressway. traffic is starting to pick up now. it's in between blossom hill road and brandon lane. the mile-long stretch where the work will be. here's why there

of the fed. >> ben bernanke the most inflationary fed chairman of all-time. this seems to be their reasoning for why they're all piling on baldy beardy ben bernanke. he made u.s. dollars worthless, they say, crazy the inflation he's created. the most inflationary chairman in the history of the fed. every time bernanke does something to stimulate the economy it makes more inflation. he's the most inflationary guy ever. republican candidates agree on that. here's what inflation looked like over the last 40 years. under fed chairman arthur burns in the 1970s this was inflation, 6%. end of the '70s, inflation went up under mr. miller. '80s, paul volcker as fed chairman. inflation came down under paul volcker. it was alan greenspan in the late 1980s. until 2006, inflation stayed pretty low. under ben bernanke's chairmanship, bernanke, according to newt gingrich is the most inflationary fed chairman of all-time -- bink. that's his inflation record. it's kind of anti-climactic, right? again, in normalsville, if you were assessing the inflationary prowess of the guy

the us fed unveils a plan, dubbed "operation twist," to push long-term interest rates to historic lows and stimulate the ailing economy. however, experts doubt its effectiveness. and typhoon roke has left at least 15 people dead or missing and scores more injured in japan. it halted subway operations in tokyo, stranding thousands of commuters. hello and welcome. in seoul,... i'm eoh jin- joo. and i'm devin whiting. president lee myung-bak... on wednesday... made a keynote speech at the un general assembly in new york,... touching upon a wide range of issues,... including promoting democracy and peace on the korean peninsula,... as well as his ideas for so- called,... "ecosystemic development." and on the third day of his trip to the us,... the korean leader also delivered a keynote speech to a high-level united nations meeting on nuclear safety. arirang's yoo ji-hae reports from new york. president lee myung-bak addressed the un general assembly on wednesday... pledging korea's support in realizing the world body's efforts in achieving international peace, democracy and "ecosystemic de

but one big question is how much money the fed might put into "operation twist."ome estimates say as little as $20 billion. but others say in order to be effective, the fed needs to put more like $500 billion in longer-term debt to make a difference. but over the past year, the ten-year treasury has already seen yields fall off a cliff beginning in august as the debt ceiling battle raged and the eurozone prices deepened. demand for treasuries have been so great that the ten-year yield briefly fell to below 2% to half-sentry lows. some suggest lowering rates even further won't be enough to persuade businesses and consumers to spend. one thing is certain. there will be many twists to this story if the fed agrees to launch "operation twist." felicia taylor, cnn, new york. >>> well, as i was just saying a couple of moments ago, there has been a stark warning from the international monetary fund. the global economy says it's in a dangerous new phase that could push europe and the united states into recession. well, the fund says that global economic activity has weaken

now when it comes to the feds we know they'll do almost anything to catch a person of interest even if they have to do that unconstitutionally in the past we've told you about the f.b.i. placing g.p.s. trackers on the suspects vehicles out of warrant that's an issue that's making its way up through the courts as we speak but what about tracking you using your cell phone we've spoken with security and privacy researcher christoffersen going on about how companies like true position have created technology designed to track individuals based on their cell phone locations. joy they do is they draw a virtual firm around how. a military base you know any place of interest and to position software can allow the phone company to sport new devices whenever they enter the virtual perimeter. so sure position is a company that sells these tracking devices to other countries but now looks like similar types of technology are being used right here at home details are emerging about a tracking system used by the feds called sting ray similar to what they're going to scribe but this device acts as if

how much money will the fed puts in? that's the question, $400 billion. maturities between six and 30 years for treasuries. a lot of people are asking is this really going to work? if you look at the markets, it doesn't look like they think it will. there's no guarantee that reducing rates will convince americans to buy or convince businesses to invest in the economy as it stands. a complicated game of twister. let's see if it will work out. >>> up next, a company known for innovation, but now some investors say hewlett packard needs to reinvent itself. we'll look at reports the caused the company's stock to surge 8%. that's just ahead on "world business today." prescription strength reliefzt from my worst allergy symptoms. so lily and i are back on the road again. with zyrtec®, i can love the air®. at aviva, we wonder why other arlife insurance companies. treat you like a policy, not a person. instead of getting to know you they simply assign you a number. aviva is here to change all that. we're bringing humanity back to insurance and putting people befo