For this reason, ad hoc responses will still be critical, such as last week's federal guarantees for money-market funds, Fed loans to banks to buy asset-backed commercial paper and, on Sunday, approval of the remaining two big independent investment banks, Morgan Stanley and Goldman Sachs, to become Fed-regulated bank holding-companies whose investment bank units can now borrow from the Fed on the same terms as other banks.

ECONOMIST: The financial crisis

When the Fed makes loans or acquires securities, the funds enter the banking system and ultimately appear in the reserve accounts held at the Fed by banks and other depository institutions.

WSJ: Bernanke Op-ed in WSJ: The Fed��s Exit Strategy

The Fed cut its target on federal funds, the overnight interbank loans that form the floor rate for U.S. lending, to just 0.25%, down 75 basis points from the previous 1.0% level.

FORBES: Magazine Article

The Fed said it was cutting the federal funds rate, the interest that banks charge each other on overnight loans, to 3.5 percent, down by three-fourths of a percentage point from 4.25 percent.

NPR: Fed Sends Signal with Deep Cut to Interest Rate

In addition to cutting the funds rate, the Fed announced it was reducing its discount rate, the interest it charges to make direct loans to banks, by a quarter-point, as well, to 4.75 percent.

NPR: Fed Cuts Key Interest Rate by Quarter-Point