– The US government has stepped in to fix the financial markets yet again with what the Washington Post describes as a “massive intervention” package. The administration plan, which received bipartisan support, “involves using hundreds of billions of dollars in government funding to buy bad loans, leaving banks with more money and fewer problems,” according to the paper.

– The bad debt plan may cost taxpayers up to $1 trillion, says CNBC.

– The Securities Exchange Commission further boosted confidence with a temporary ban on short sales of 799 financial institutions.

– Rumors of the massive bailout plan gave US stocks their biggest rally in six years. Bloomberg reports that traders erupted into cheers on the floor of the New York Stock Exchange as the Dow Jones Industrial Average jumped 617 points.

– MarketWatch reports this morning that the Treasury has said it will also provide “a temporary guaranty program for US money market funds.” “For the next year, the US Treasury will insure holdings of any publicly offered money market mutual fund, retail and institutional, that pays a fee to participate,” reports the site.

– US futures this morning are pointing to another day of big gains. S&P 500 futures up 46.9 points to 1,250.10 and Nasdaq 100 futures rose 42.25 points to 1,750.75. Dow industrial futures rose 320 points.

– Not everyone is pleased with the scale of the government’s intervention in the so-called ‘free market.’ Yesterday, House Republicans called on President Bush to stop what they call the current “bailout mania.” A letter by the Republican Study Committee, comprised of 100 conservative lawmakers, called on Hank Paulson to  “refrain from conducting any additional government-financed bailouts for large financial firms,” citing concerns for taxpayers. “These massive federal bailouts have exposed taxpayers to literally tens of billions of dollars of new risk” and has created “a moral hazard where companies are absolved, not punished, for excessive risk taking,” the letter said.

– The unprecedented series of government bailouts for Wall Street firms puts an enormous strain on the US financial system says Chuck Butler in Daily Pfenning. In particular, Chuck is concerned that it won’t be long before the US can no longer find foreign investors fund its massive nationalization programs.

Foreign investors obviously have begun to lose faith in the US, and will continue to demand higher compensation for providing the money the US government and economy depend on. That in turn will translate into higher interest rates here in the US, and a lower US$. The average American will face lower living standards as borrowing costs are pushed higher and the dollar is pulled lower.

– This sentiment is echoed by Casey Research’s Doug Casey…

Foreign buyers exited the market for U.S. dollar-denominated debt and securities when the credit crisis surfaced in August of 2007. And their return since is proving to be somewhat tentative, as revealed in the latest US Treasury International Capital (TIC) report on capital flows. In July 2008, foreigners once again fled the scene, and were net sellers in U.S. capital markets to the tune of $25.6 billion.

– Oil prices have also recovered, bursting back above $100 a barrel today on the back of more positive sentiment on Wall Street.

–  Gold prices slipped nearly 3% in Europe this morning, however, as appetite for risk returned to the equities markets.