JIM LEHRER: Jeffrey Brown oversees the economic week and month that were.
JEFFREY BROWN: It was, we can say on this Halloween, a very scary month. But on Wall Street, at least, it ended on a positive note.
Our update tonight comes from David Wessel, economics editor of the Wall Street Journal.
Well, the worst month in 21 years, the best week in 34 years. David, can you offer any helpful perspective for us tonight?
DAVID WESSEL, Wall Street Journal: Well, I don’t think you want to take too much comfort in what happened to the stock market. In a time like this, it’s a little bit like the car is skidding on the ice, and you don’t want to look at the speedometer too closely, because that’s not where the problem is.
But it was good news. As you point out, the market had a great week, up 11 percent this week. Although, for the month, it was an awful month, down 14 percent.
And the question really is, is this the bottom? And the answer is, we don’t know. All bottoms look like this, but not every market that looks like this is, in fact, a bottom.
JEFFREY BROWN: One thing that continues to rattle people, I think, is the volatility.
DAVID WESSEL: Right.
JEFFREY BROWN: Many of us here have decided that maybe it’s not worth even looking at the Dow number until 3:55, five minutes before the close, because of the huge swings. Do you sense that we just have to get used to that now?
DAVID WESSEL: Well, I think for the time being. I think it reflects a couple of things, one is the kind of panic that’s out there, where people are not being completely rational. Markets do tend to overshoot at times like this.
But, secondly, the stock market is only one market. And the other markets, the credit markets, the bond markets, the currency markets, they’re all behaving very strangely, too. So they’re giving us kind of misleading readings or uncertain readings. And at times of uncertainty and panic, you know, traders will do weird things at 3:55 on Halloween.
Mixed news on spending, markets
JEFFREY BROWN: Now, there was a lot of bad news this week, the consumer spend, consumer confidence. But what about any good news to report at the end of the week?
For example, you just mentioned the credit markets. There was some signs of loosening. What else was out there this week?
DAVID WESSEL: Right. The important interest rates that we didn't used to pay any attention to a few months ago, like the LIBOR, the London Interbank Offered Rate, has come down. That's a sign that the credit markets may be starting to thaw a little bit. That's good.
Oil prices are way down, down 33 percent in the month of October. That's almost like a tax cut for American consumers, the people who are heating their houses and driving their cars with oil. That's a plus.
And one thing we don't seem to have to worry about right now is inflation. You know, just a few months ago, the fear was the Fed wouldn't be able to help us out of this mess because they were preoccupied with inflation. Well, that fear seems to have completely evaporated.
JEFFREY BROWN: Now, there were also many more rumblings this week about what the government has or perhaps has not accomplished yet with all of its attempts at dealing with this. There are still a lot of questions out there about the $700 billion rescue plan, right?
DAVID WESSEL: Right. Well, there were a lot of questions about the entire federal rescue here. We've done all -- the Fed has done an extraordinary number of things.
As you point out, the Congress has appropriated $700 billion. Fannie Mae and Freddie Mac, the mortgage giants, have been taken over by the government, yet we don't seem to be getting well yet, and I think that's a cause for great concern. The question is whether the medicine is going to take hold soon or whether we need more medicine.
With the $700 billion, there's a lot of argument about how best to spend it. And is it being spent well?
As you know, there's been a big fight about whether giving money to the banks is serving the desired purpose. If they sit on the money, use it to pay dividends, use it to buy other banks, that doesn't help lending.
So some people want to force them to do lending. And so there's -- until things get better, there's going to be a lot of second-guessing.
Housing market remains unstable
JEFFREY BROWN: Still a lot of talk, too, about a coming proposed plan for housing. And Fed Chairman Bernanke was talking about the housing market today. And also, a lot more talk this week, I noticed, about a potential stimulus plan, right?
DAVID WESSEL: Right. I think we'll see action on both fronts.
On the housing front, the government, whether it's the Bush administration or the next president, plus some of the banks, are going to move to deal with the fact that 1 in 5 Americans with a mortgage has a mortgage that's greater than the value of the house.
And that's not a very stable situation. Those people have nothing to lose by walking away from their houses.
In order to reduce foreclosure, both banks today -- it was JPMorgan Chase -- and the government is likely to help these people cut a new mortgage deal.
On the stimulus front, well, when all else fails, the economic textbooks tell us the government should spend some money, fiscal stimulus. And there seems to be a lot of support for that now.
Fed Chairman Ben Bernanke has endorsed it. Marty Feldstein, who was a Reagan adviser, has endorsed it. Senator Obama has endorsed it. And the Democrats in Congress are not waiting for the inauguration to start moving legislation.
The only question is, what will it be? How big will it be? And will it be designed to help the economy in the near term or will it be a list of pet projects that, by the time the money is spent, we'll be well beyond this episode?
And we'll just have to wait and see.
JEFFREY BROWN: All right, David Wessel of the Wall Street Journal, one of the many people who helped us get through this very strange month, thanks again.
DAVID WESSEL: You're welcome.