Fed asserts new powers. “Banks, hedge funds and other financial institutions could find their investment strategies curtailed by the Federal Reserve to reduce the risk to the economy from asset bubbles, the US Treasury said yesterday,” reports the Financial Times. As usual, government meddling creates a problem which is to be solved by more government meddling. We can rest assured there will still be asset bubbles — just not in the same sectors as the previous bubbles.

Oil traders take rising gulf tensions in stride. Still a bit above $115 despite the arrival of a second U.S. aircraft carrier in the Persian Gulf, with hawkish rhetoric from Defense Secretary Robert Gates to match. (So much for the notion that Gates was in the Poppy/Jim Baker/Brent Scowcroft “realist” mold.) Curiously, a Navy spokesman plays it all down, saying the Lincoln is just taking over from the Truman, and the overlap won’t last longer than “a day or two.” We shall see.

Q1 GDP comes in at 0.6%. John Williams called it on Monday (and earlier, too): We’re in a recession, but the official figures won’t be allowed to reflect it in an election year.

Elsewhere: More flight from the dollar; Chinese exporters are asking Europeans for payment in euros. And don’t expect any increased oil production from Mexico, not based on the squeals elicited by the president’s rather modest proposals to reform the state oil company.

And finally: “Mayor Daley well placed to be Democratic peacemaker,” says a headline in the Financial Times. As an ex-Chicagoan, I advise you to read this profile of “Da Mare” in its proper context: Daley’s moving to the next stage of a charm offensive to burnish Chicago’s image for an international audience in hopes of landing the 2016 Olympics next year. Time will tell if his efforts can overcome things like a recent wave of shootings and a public transit system that’s an international embarrassment.