Last week former Federal Reserve Chairman Alan Greenspan strongl y criticized the form of the Congressionally mandated Freddie Mac/Fannie Mae "backstop" program and a survey by the Wall Street Journal found that a small majority of economists involved thought the bailout of the two government sponsored entities (GSEs) would ultimately be invoked, handing taxpayers responsibility for their $5.2 trillion debt.

Meanwhile, more voices were added to the chorus of experts and pundits predicting that government intervention will be required.

Speaking in an interview with Bloomberg TV, Richmond Federal Reserve President Jeffrey Lacker (non-voter) said the Fed should not wait too long for a rate hike.

The Richmond Fed President said inflation will slow if oil prices drop. He added that inflation is still a "risky situation," and that keeping inflation in check requires a tight monetary policy...

The Federal Reserve must be prepared to take action and curb inflation if slowing growth doesn't moderate prices as expected, said the most hawkish member of the FOMC on Tuesday.

U.S. government-backed mortgage finance company Freddie Mac caused ripples through the debt market on Tuesday after weak results in a $3 billion, 5-year note auction.

The reference note sold for 113.0 basis points above the 5-year Treasury benchmark. Before the auction, the 5-year spread was 105 bps.

The weakening economy is a major negative factor for the Republicans and presents candidate John McCain with an uphill battle for the Oval Office, economists from Global Insight say.

Historically, there has only been one other election year where year- over-year growth in disposable income per capita was negative, noted Nigel Gault, chief U.S. economist at Global Insight...