The machinations of the US Federal Reserve are uppermost in the minds of investors — and the media. The Fed is in a jam. On the one side slowing growth and the specter of the credit crisis. Rising inflation on the other.

S&P’s/Case-Shiller’s index of housing prices in 20 major US cities fell by a record 15.3% year-on-year in April, the steepest drop since the began collecting data in 2001.

“A very nasty period is soon to be upon us — be prepared,” reads the latest release from the Royal Bank of Scotland. Its hotshot credit analyst Bob Janjuah predicted a 22% crash for the S&P 500 by September… “The Fed is in panic mode.

While the US and most of Asia struggle to put the inflation geenie back in the bottle, David Stevenson in Money Week heaps praise on European Central Bank president Jean-Claude Trichet, who is fast becoming the hero of inflation fighters everywhere…

There’s a great wish for American finance to return to business-as-usual — raking in fantastic fees for innovating new modes of tradable paper, and engineering mergers and buy-outs that generate huge fees plus $100 million kiss-offs for corporate CEOs in the noble struggle to dismantle America’s productive capacity — but apparently events are still out of hand.

In a series of comments by Federal Bank Governors, they have let it be known that preventing buildups like the dotcom and housing bubbles may become a priority for the Fed. Ft.com report says that the Treasury recommends giving the Fed wide authority to require financial institutions to alter behaviour that it believes poses a threat to financial ­stability.

About Bernanke's testimony today, from the Wall Street Journal - Notably, Mr. Bernanke omitted a pledge he has repeatedly made in recent months to act in a "timely manner as needed" to support growth from Wednesday's prepared testimony. That could signal that he doesn't see much more room to lower interest rates.

What bernanke is saying is that lenders should reduce loan principals, instead of just interest rates, thus reducing the pressure on mortgage owners facing foreclosure. As motivation for lenders, he offers up the schtick that the foreclosure filing and process could take well over a year, and could end up costing more than a prinicpal write-down. This is extortion, plain and simple.

Ben Bernanke, Chairman of the US Federal Reserve, was facing mounting criticism last night of his handling of the crisis in world markets, raising concerns that he has lost the confidence of Wall Street before the Fed’s key meeting on interest rates.

Tomorrow looks like it is going to be a blood bath for the bulls... The Dow futures are down as much as 520 points as global markets around the world are being hammered. If you are a long-term investors these are the hardest times to take. It is tough to see your hard fought gains go down the drain as the bears take over and short everything in site.

Ben Bernanke, the Chairman of the US Federal Reserve, cheered American and world markets last night when he signalled that it was ready to take aggressive action to bolster American prospects and fend off recession.