"After two weeks of anguishing debate, Congress passed and President Bush signed the enormous plan to save the financial industry and prop up the economy in hopes of avoiding an unthinkable free fall with Election Day just a month away," the Associated Press reports.

After the House of Representatives torpedoed a bail-out bill early last week, the House reversed course and gave final approval to a revised version of the $700 billion economic plan, called the Emergency Economic Stabilization Act of 2008, on Friday afternoon.

President Bush signed it into law less than an hour-and-a-half later, authorizing the Treasury to undertake what could become the most expensive government intervention in history. The Washington Post notes that Bush's quick signing was an "unusual display of urgency."

"The change in course by the House was prompted by fears of a global economic meltdown, and by old-fashioned political inducements added by the Senate: a portfolio of $150 billion in popular tax provisions, including credits for the production of solar, wind and other renewable energy, and an adjustment to spare middle-class families from paying the alternative minimum tax," the New York Times says.

"The measure gives Treasury Secretary Henry Paulson expansive powers — unprecedented outside of wartime — to intervene in financial markets by relieving faltering firms of distressed assets backed by home mortgages, which are falling into foreclosure at record rates," the Post continues.

"The Treasury Department is expected to move quickly to start buying distressed assets from struggling financial institutions, although any impact might not be felt for some weeks," according to the Wall Street Journal. Many details still need to be worked out.

Regulation Expected to Increase
In the wake of the bailout, "further-reaching regulation is almost certain," AP makes clear. "Previously obscure corners of the industry now subject to few rules, such as complex derivatives and hedge funds, could face federal supervision for the first time. Meanwhile, heavily regulated sectors, such as banking and insurance, are likely to face greater oversight. Even some financial industry groups support federal oversight for the insurance industry, which is now regulated only at the state level."

The bill establishes oversight by Congress, the Treasury Department's Office of the Comptroller and a new Financial Stability Oversight Board to be run by the Treasury Secretary, the Federal Reserve chairman, the Securities and Exchange Commission chairman and others.

However, it remains to be seen just how strongly regulators and lawmakers will flex their muscle.

Hearings will begin today to examine the failures of current regulations. AP notes that the House Oversight and Government Reform Committee, chaired by Rep. Henry Waxman (D-Calif.), "will hold two hearings on the causes and effects of Lehman Brothers' bankruptcy and on the $85 billion bailout of the giant insurer American International Group Inc." Over the next month, the committee plans to hold "three more hearings . . . on hedge funds, credit rating agencies and the role of regulators in the run-up to the crisis."

Financial Turmoil Spreads Among European Banks
The decision in Washington came as the leaders of France, Germany, Italy and the United Kingdom "vowed Saturday to protect their banks from the continuing reverberations of the increasingly global financial crisis but could not agree on a common Europe-wide strategy," the Washington Post reports.

European nations "scrambled" last night to "prevent a growing credit crisis from bringing down major banks and alarming savers as troubles in financial markets spread around the world, accelerating economic downturns on three continents," the New York Times reports

Unlike the U.S., "Europe plans to continue dealing with its financial problems on a case-by-case basis," according to the Post. "That approach, which has involved tens of billions of dollars at a step, is complicated by the transnational presence of so many large European financial institutions."

Europe's central banks have now taken unprecedented emergency measures. "The European Central Bank said it would widen its quick tenders of cash from the normal 130 banks to all of the 1,700 banks it deals with," the Financial Times reports. The governor of Bank of England blamed "extraordinary conditions" for a second £40 billion injection of three-month money into British banks on Monday.

Job Losses Rise
The number of U.S. workers filing new claims for unemployment benefits rose by 1,000 to a seasonally adjusted 497,000 in the week ending Sept. 27, the U.S. Dept. of Labor reported on Thursday. That was the highest since Sept. 29, 2001, and reflected the effect of hurricanes Gustav and Ike as well as a weakening economy. The four-week moving average was 474,000, an increase of 11,500 from the previous week's unrevised average of 462,500.

Another Labor Department report, released on Friday, showed that the U.S. economy lost 159,000 jobs in September, the worst since March 2003.

"The economy has now lost 760,000 jobs this year, further evidence that the economy was in a recession even before the financial market crisis of the past few weeks," according to MarketWatch.

September's unemployment rate, however, remained at 6.1 percent after a sharp 0.4 percent increase in August.

Private-Sector Job Losses Surprisingly Low
The Labor Dept.'s comprehensive labor market came soon after a report by ADP Employer Services, which determined that U.S. private employers cut 8,000 jobs in September. The number is surprisingly low, but the data did not include the financial chaos of the past two weeks. The ADP report also revised the number of jobs lost in August to 37,000 from the originally reported loss of 33,000.

Manufacturing Jobs Continue Downward
Manufacturing employment fell by 51,000 over the month, bringing the decline in factory jobs to 442,000 over the past 12 months, according to the Labor Dept.'s latest numbers. Job losses last month continued in motor vehicles and parts (-18,000), an industry that has "shed 140,000 jobs over the past 12 months," Industryweek says.

In terms of job losses among durable goods manufacturers, "employment decreased in fabricated metals (-7,000), wood products (-5,000), and furniture and related products (-5,000)." Nondurable goods manufacturing saw losses in "paper products (-3,000) and plastics and rubber products (-4,000) . . . over the month."

Jobs in "transportation and warehousing declined by 16,000 in September and by 57,000 since its peak 12 months earlier." Meanwhile, job losses mounted "in trucking (-12,000) and air transportation (-5,000)."

Automobile and parts dealers lost 10,000 jobs. This industry has lost 48,000 jobs in the past four months," notes IndustryWeek.

Factory Orders Fall in August
Demand for U.S. factory goods dropped at the fastest rate in two years in August on much lower orders for metals, machinery and vehicles, the Commerce Department reported Thursday. New orders for manufactured goods in August, down following five consecutive monthly increases, decreased $18.6 billion, or 4 percent, to $444.4 billion.

The New York Times calls the 4 percent drop "a much worse performance than the 2.5 percent decline that economists had expected. It was the biggest setback since a 4.8 percent plunge in October 2006."

Orders for durable goods fell 4.8 percent in August, revised lower from the 4.5 percent estimate provided a week ago. Shipments and orders for nondurable goods fell 3.3 percent, largely because of lower prices for crude oil and gasoline. Excluding the 9.1 percent drop in transportation orders, factory orders fell 3.3 percent, the biggest drop since September 2001.

The Institute for Supply Management further echoes manufacturing's contraction in September, registering 43.5 percent on its PMI. That is 6.4 percentage points lower than the 49.9 reported in August and the lowest reading since October 2001. A reading above 50 percent indicates general expansion; below 50 percent indicates manufacturing is generally contracting.

Meanwhile, new orders for September were at 38.8, down from 48.3 in August, while the production index was at 40.8, down from 52.1 in August. Hiring also fell, "with the employment index at 41.8 in September compared with 49.7 in August and 51.9 in July. Inventories contracted, with that reading at 43.4 versus 49.3 in August.

Manufacturing Down Worldwide
"Manufacturers across the world's advanced economies suffered a torrid September . . . providing clear evidence that the real economy had been unable to escape the woes of the financial sector," the Financial Times reports (subscription required). Along with the U.S., manufacturing output fell for September in Japan, the eurozone and Britain.

In the 15 countries sharing the euro, manufacturing activity retreated faster than expected in September. The eurozone purchasing managers' index (PMI) for the manufacturing sector, compiled by data and research group Markit, slipped to 45 points in September from 45.3 points in August. (Source: Agence France-Presse)

"The only bright spot was China, where an equivalent survey showed a bounce back in manufacturing in September after a weak August," the Financial Times notes.

Auto Sales are Grim
The shaky economy and tightly constricted credit market hit September automobile sales hard.

"For the first time since 1993, automakers sold fewer than a million new cars and trucks in a single month in the United States. . ." the New York Times reports. Industry sales dropped "26.6 percent over all compared with a year ago," making car companies more "likely to cut more production and jobs to compensate for falling revenues."

"The six biggest automakers all reported steep declines in September, including Japan's top carmakers, which have been more resilient in the deteriorating market, particularly as rising gas prices stoked demand for fuel-efficient cars," the Detroit News notes.

As the Los Angeles Times reports, Ford Motor Co. sales fell 33.7 percent for the month, while General Motors "had a relatively modest 15.5 percent decline, provoking a near celebratory response from the nation's largest automaker."

"Most jarring for the industry may have been the severe drop for Japanese automakers, widely considered the strongest players in the U.S. market, especially in the small-car segment," the Wall Street Journal says. In September, Toyota Motor Corp. sales fell 32.3 percent, while "Honda Motor Co. dropped 24 percent and Nissan Motor Co. saw its North America sales tumble 37 percent."

Regarding the dropping sales of Japanese automakers, the Washington Post calls the fall "a major reason why Japan's export-driven economy began shrinking in the second quarter and why many economists here are predicting a long recession." This weakness in "the U.S. car market, the world's largest, comes on top of a longer fadeout in Japan's car market, the second-largest. Sales of new cars in Japan have been falling steadily for 18 years."

Global Steel Industry Susceptible to Economic Ups and Downs
Since the end of June, "many companies that buy steel have started to reduce purchases on the back of weaker demand in their sectors," according to the Financial Times. "Much of this is linked to credit restrictions spreading into the economy." This has caused "prices for many grades of steel [to fall] substantially."

To counter the weaker trends, "many steel companies are preparing to cut production, at least for a few months, in the hope this will match falls in demand, and maintain prices and profitability."

"We are in a period of high economic uncertainty," Ku-Taek Lee, chairman of the World Steel Association (formerly the International Iron and Steel Institute) and CEO of POSCO, said in a statement over the weekend. "The impact on steel markets is becoming more apparent as we move into the later part of this year.

"However, we continue to expect growth in steel demand in 2009 and for the medium term, above the world GDP growth rate," Lee continued

The global steel industry has "combined sales of about $1,000bn a year," according to the Financial Times.