October 07 2008 at 02:28 PM

In a much-anticipated speech to the National Association for Business Economics, Fed Chairman Ben Bernanke strongly hinted at an upcoming rate cut. “The combination of the incoming data and recent financial developments suggests that the outlook for economic growth has worsened and that the downside risks to growth have increased,” while the price outlook has “improved somewhat,” said Bernanke. “In light of these developments, the Federal Reserve will need to consider whether the current stance of policy remains appropriate.”

Bernanke also pointed out that consumer spending is shrinking fast and that economic activity will remain “subdued” well into next year, and that dropping commodity prices and slower growth will probably moderate inflation. He also promised to keep using all the tools at the Fed’s disposal to try to get the credit markets functioning again. Investors didn’t seem to be overly cheered by his remarks, as the Dow continued to drop and was down around 250 points at 2:30 p.m.

Source: Wall Street Journal

Car Slowdown in Europe

The U.S. isn’t the only country with an auto industry in the ditch. In Europe, both domestic and foreign carmakers are reducing production and jobs in the face of drooping demand. BMW, Daimler, GM’s Opel unit, and the German unit of Ford all announced cutbacks in Germany on Tuesday. One analyst predicts that September sales numbers will show a “wholesale slump.”

Source: CNNMoney.com

Iceland on the Brink

With its President warning yesterday of a “national bankruptcy” because of the near-collapse of its banking system, Iceland requested a $5.4 billion loan from Russia, pegged the slumping krona to a basket of currencies, and seized its second-largest bank, Landsbanki, having already nationalized Glitnir Bank last week. The global credit crunch has crippled Iceland’s biggest banks, which have racked up foreign debts equivalent to as much as 12 times the size of the economy.

Source: Bloomberg

Obama Widens Lead in Two Polls Less Than Month Before Election

Barack Obama has widened his lead over Republican presidential rival John McCain in two national polls and is maintaining an edge in two daily tracking polls with less than a month to go before the election. An NBC-Wall Street Journal poll found Obama supported by 49% of registered voters, a 6-point margin over McCain.

Source: Bloomberg

Oil prices fall as financial turmoil goes global

Oil prices plunged below $90 a barrel Monday, coming within reach of year-ago levels as a widening financial maelstrom spreads overseas and crimps global demand for energy. A barrel of oil has not been this cheap in eight months, suggesting that the climate in which oil soared to unheard of levels is coming to an abrupt end.

Source: Associated Press via BusinessWeek

Business Cool Toward McCain’s Health Coverage Plan

American business, typically a reliable Republican cheerleader, is decidedly lukewarm about Senator John McCain’s proposal to overhaul the health care system by revamping the tax treatment of health benefits, officials with leading trade groups say.

Source: New York Times

A.M.D. to Split Into Two Operations

Advanced Micro Devices plans to announce Tuesday that it will split into two companies — one focused on designing microprocessors and the other on the costly business of manufacturing them — in a drastic effort to maintain its position as the only real rival to Intel. In addition, the company said two Abu Dhabi investment firms would inject at least $6 billion into the two firms.

Source: New York Times

Zoellick: Break Up the Group of Seven

World Bank President Robert Zoellick said on Monday, Oct. 6, that the global financial crisis is getting “a wake-up call,” indicating that the world’s financial system needs a fundamental shakeup. Western industrial powers should disband their clubby Group of Seven, and embrace a more flexible, broader-based group of nations reflecting today’s more dispersed financial realities.

Source: BusinessWeek

Asian Stocks Decline; Australia Rebounds on Interest-Rate Cut

Asian stocks fell on concern surging credit costs will deepen a global slowdown. Shares pared losses and U.S. futures gained after an Australian interest-rate cut spurred speculation more central banks will follow. Toyota slumped 4.6%, losing its spot as the world’s largest automaker by value to Volkswagen, on concern car demand will decline

Source: Bloomberg

Can GM and Ford Scrape By?

Just three months ago, General Motors Chairman and CEO Rick Wagoner said he was moving to secure $15 billion in cash through asset sales, borrowing, and cost cuts that would see the company through to 2009 even in the worst of times. Barely three months later, with its stock trading at a 54-year low, GM is looking for more ways to save cash.

Source: BusinessWeek

Treasury Names Former Executive To Oversee Rescue Plan Spending

The Treasury Department on Monday named a former Goldman Sachs executive to oversee spending for the $700 billion financial rescue plan. The administration announced it had tapped Neel Kashkari, 35 — an assistant Treasury secretary for international affairs — to head the Treasury’s new Office of Financial Stability on an interim basis.

Source: Washington Post

Conversation of the Day: Venture Capital Tremors

http://app.businessweek.com/UserComments/combo_review?action=getComment&productId=36558&reviewId=334322#334322

Reader Fred Wilson: Venture capital has a very long lag time because the funds we raise are 10-year funds and partners have to stick around and manage them.”

Tell Us: Will a VC crunch discourage (or focus) startups?

http://www.businessweek.com/technology/content/oct2008/tc2008108_881287.htm

Hot Topic on the Business Exchange:

Henry Blodget and others are sharing their insights on the government bailout of the U.S. banking sector.

http://bx.businessweek.com/credit-crunch/ http://www.economist.com/finance/displayStory.cfm?story_id=12209655