The biggest financial bailout in history is before Congress this week. But the $700 billion proposal still leaves several questions unanswered. Money Morning’s Jennifer Yousfi says the price at which the US Treasury buys up distressed debt from the market will be crucial. If set too high, the burden on taxpayers will increase; too low and it could lead to another round of devastating writedowns.

As the financial sector continues to roil with uncertainty and unease, Kraft Foods Inc. (NYSE:AIG) in the

With the commercial-paper market evaporating – causing its ability to operate to do the same – Morgan Stanley escalated its frenetic search for a well-capitalized partner to help it restore investor confidence. Morgan Stanley shares have lost more than 40% in the past week, leaving Morgan Stanley Chief Executive John J. Mack seeking a tie-up with a commercial bank.

Having savaged the U.S. financial sector since it surfaced in the summer of 2007, the credit crisis evolved into a crisis of confidence – which has manifested itself as a liquidity crisis. And that liquidity crisis is no longer confined to the financial sector. It’s spilled over into the energy sector, as well.

U.S. stocks rallied the most in six years yesterday (Thursday) – with traders actually cheering the ticker action from the floor of the New York Stock Exchange – on the news that the federal government is taking steps to shore up the unraveling U.S. financial system and end the global credit crisis.

Citing balanced threats from weak economic growth and inflation, the U.S. Federal Reserve yesterday (Tuesday) voted to hold the benchmark Federal Funds rate at 2.0%, reports Money Morning’s Jennifer Yousfi. This was despite a financial market that has been rocked in recent days by the continued fallout of the credit crisis.

The demise of Lehman Brothers (NYSE:LEH) will have a ripple effect in the wider financial markets, says Jennifer Yousfi. Creditors around the world will lose money on the company’s $613 billion debt. And the liquidation of Lehman’s portfolio – a liquidation on an unprecedented scale – will have a market-flooding effect, driving down asset values and stock prices to dangerously low levels.

As Wall Street implodes, Bank of America Corp. (NYSE:BAC) has become the “new big kid on the block,” says Jennifer Yousfi. BofA has bought struggling Countrywide Financial and now Merrill Lynch (NYSE:MER) to become a US leader in financial services.

The euro fell to a one-year low versus the dollar as economic concerns about European Union member nations continue to mount. The euro shed 0.6% to trade at $1.394 at 1:40 p.m. in New York yesterday (Thursday). Wednesday, the dollar reached as high as $1.3882, its highest level since Sept. 18, 2007, before dropping slightly to close at $1.3998, according to Bloomberg data.

In a move to reassure spooked investors and curtail a crisis of confidence, Lehman Brothers Holdings Inc. (NYSE:LEH) moved up its third-quarter fiscal earnings release to early yesterday morning, says Jennifer Yousfi in Money Morning.