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By Jeannine Aversa And Martin Crutsinger
Associated Press
       WASHINGTON — Put it in the history books: The country was officially diagnosed with a job-killing recession Monday, and woeful new evidence showed that it's getting worse. Wall Street convulsed at the news, tanking 680 points, and Washington pledged even more help to try to ease the pain.
    With the economic pain likely to stretch well into 2009, Federal Reserve Chairman Ben Bernanke said Monday that he stands ready to lower interest rates yet again and to explore other rescue or revival measures.
    Rushing in reinforcements, Treasury Secretary Henry Paulson, who along with Bernanke has been leading the government's efforts to stem the worst financial crisis since the 1930s, pledged to take all the steps he can in the waning days of the Bush administration to provide relief. Specifically, Paulson is eyeing more ways to tap into a $700 billion financial bailout pool.
    On Capitol Hill, House Speaker Nancy Pelosi, D-Calif., vowed to have a massive economic stimulus package ready on Inauguration Day for Barack Obama's signature.
    That measure — which could total a whopping $500 billion — would bankroll big public works projects to generate jobs, provide aid to states to help with Medicaid costs and provide money toward renewable energy development. Crafting such a colossal recovery package would mark a Herculean feat: Congress convenes Jan. 6, giving lawmakers just two weeks to complete their work if it is to be signed Jan. 20.
    Not only did stocks end their five-day winning streak on Monday, they erased more than half the gains. The Standard & Poor's 500 stock index, one of the broadest market gauges, lost nearly 9 percent.
    The selling was broad and deep. All 30 of the stocks in the Dow Jones industrial average finished lower. On the New York Stock Exchange, more than 7 stocks fell for every one that rose.
    The Dow lost 679.95 points to close at about 8,149. There have only been three days in market history with bigger point losses for the Dow — the Monday after the Sept. 11 attacks in 2001, and Sept. 29 and Oct. 15 of this year. The S&P 500 index dropped 80.03, or 8.93 percent, to 816.21. This was the worst point and percentage drop for both blue chip indexes since Oct. 15. The Nasdaq composite index fell 137.50, or 8.95 percent, to 1,398.07. Investors were also nervous after weekend sales figures indicated that many Americans will cut back their trips to the mall this holiday season. Monday brought additional bad news: that Manufacturing had dropped to its worst levels in 26 years and construction spending fell by a larger-than-expected amount in October.
    Although Monday's plunge was notable because it cut short a five-day rally — the first such winning streak for the Dow and the S&P 500 since July 2007 — it also fit what has become a pattern on Wall Street: The market makes big moves higher, including triple-digit gains in the Dow, only to quickly give them back as another batch of bad news arrives.
    "We've got a tug-of-war of war going on," said Al Goldman, chief market strategist at Wachovia Securities in St. Louis.
    To help ease the pain, Bernanke said additional interest rate cuts are "certainly feasible," but he warned there are limits to how much such action would revive the economy, which is likely to stay mired in weakness well into next year.
    The Fed's key interest rate now stands at 1 percent, a level seen only once before in the past half-century, and many economists predict Bernanke and his colleagues will drop the rate again at their next meeting on Dec. 15-16.
    The Fed can lower its key rate only so far — to zero — and it's getting ever closer.
    The bracing impact of the Fed's aggressive rate reductions has been somewhat stymied by the credit and financial crises, Bernanke said. Despite lower borrowing costs, skittish banks have been reluctant to lend money to people and businesses, a vicious cycle that has seriously hobbled the U.S. economy.
    "Even if the functioning of financial markets continues to improve, economic conditions will probably remain weak for a time," Bernanke warned.
    Paulson, meanwhile, has been working closely with the incoming administration, including New York Fed President Timothy Geithner, Obama's pick to be the next treasury secretary, to pave the way for a smooth transition.
    "We are actively engaged in developing additional programs to strengthen our financial system so that lending flows into our economy," Paulson said, referring to tapping the $700 billion bailout fund. "When these programs are ready for implementation, we will discuss them with the Congress and the next administration," he added.

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