After 18 months of inertia, Fed Chairman Ben Bernanke has finally done something: succumb to pressure from Wall Street. On August 17, the Fed cut the discount rate 50 basis points (b.p.), to 5.75%, in the first inter-meeting move since 9/11, after the $33 billion excess it pumped into the credit system over the previous week failed to calm the markets. Both European and U.S. stocks rallied on the news, and intermediate Treasuries followed suit.

At least one primary dealer is now forecasting 50 basis points worth of cuts in the fed funds target by yearend, and the December funds futures contract yield suggests traders think the Fed will move even more. The downward movement in the two-year yield also suggests that intermediate traders anticipate an imminent ease. Bernanke had been trying to avoid the so-called "Greenspan put," but ultimately he caved to pressure from investment banks around the globe. Stock traders are happy, and Jim Cramer–whose rant exhorting Bernanke to open the discount window became the most-viewed video on Youtube–is ecstatic.

But will it be enough? The open-market operations executed over the week before the cut were at first welcomed, but they didn't do enough to calm the markets. As the news hit that Countrywide Financial had tapped its $11.5 billion line of credit, and that Merrill Lynch had rated its stock a "sell," citing the risk of bankruptcy, the markets continued to panic–and clamored for a bailout from the Fed.