These days, investors large and not so large are following the financial markets more closely than they have perhaps in decades. Is the U.S. recession worsening? Are there any more problematic banks? Is the market bottoming? There's a lot to assess, particularly if you have a 401K.

In times like these investors/readers turn to the likes of Warren Buffett or George Soros to analyze the financial and economic state of things.

However, today we turn to another trusted source, for time-tested counsel, advice, and wisdom: Lawrence Peter 'Yogi' Berra, retired Hall of Fame catcher for the New York Yankees, owner of 10 World Series championship rings and author of 'yogiisms' - - incisive malapropisms that reveal eternal truths.

Those who know Yogi know that his northern New Jersey home is accessible via two different routes, starting from a fork in the road. Hence, when Yogi gives directions to his house he says, "When you come to the fork in the road, take it."

Yogi's adage applies to economics, as well. When you come to the (economic) fork in the road, take it.

The United States is coming to an economic fork in the road, of sorts: it can get to its destination - - economic recovery - - by one of two paths.

The first would involve primarily using the Federal Reserve and quantitative easing. The Fed has already said it will purchase more than $600 billion of private debt, including commercial paper, mortgage-backed securities, and other asset-baked securities. (In order to cover potential losses associated with the Fed's purchases, the U.S. Treasury has set aside $20 billion in TARP funds authorized by Congress.) However, while additional quantitative easing in the aforementioned commercial segments (especially mortgage-backed securities) may trigger an increase in economic activity, such as an increase in mortgaged-based home purchases, it may not represent the segment where the Fed wants the extra growth to be.

The typical American's tolerance for federally rescued banks and other institutions that continue to award bonuses? Very little.

Three-quarters of Americans say Goldman Sachs (NYSE: GS), Citigroup (NYSE: C) and other bailed-out and taxpayer-assisted companies should cancel all bonuses this year, a new Bloomberg News / Los Angeles Times poll shows.

Further, a majority of respondents also said the U.S. government should have a voice in how these companies are managed, while two-thirds favor tighter financial sector regulation. The poll was conducted December 6-8.

Economist Richard Felson said it's understandable that Americans would express concern about bonuses in financial institutions that accepted federal assistance.

"Awarding bonuses does send the wrong signal. It's also arrogant in the view of many citizens. In our nation, hundreds of thousands of taxpayers are being laid-off with no federal assistance to cushion their loss of income, and down the street a bank executive of a bank who received federal bailout money could be collecting a $300,000 bonus. It gives the appearance of the federal government paying for these bonuses . . . paying for large compensation despite these business flops," Felson said. "It's an arrogant and incorrect policy."

A cardinal rule of Washington is don't tick-off anyone chairing a committee essential to your operations.

Well, it looks like this U.S. Treasury Department has done just that.

U.S. Sen. Chris Dodd and U.S. Rep. Barney Frank have just about had it with the U.S. Treasury Department and its implementation of the Troubled Asset Relief Program (TARP).

Dodd, D-Connecticut and Chairman of the Senate Banking Committee, and Frank, D-Massachusetts and Chairman of the House Financial Services Committee, said this administration's Treasury department may not get the second half of the $700 billion TARP financial rescue fund, as they are upset at how the program is being run, Bloomberg News reported.

"I would be a very hard person to convince that this crowd deserves...the next $350 billion," Sen. Dodd told Bloomberg News.

Further, Rep. Frank said Treasury has ignored "clear Congressional intent," and that at the very least he wants to see that some of the new money was going to used for home mortgage foreclosure relief, Bloomberg News reported.

The Government Accountability Office, Congress' investigative arm and watchdog, said the U.S. Federal Reserve and the U.S. Treasury have the authority to bail-out the Big Three automakers, marketwatch.com reported Thursday.

Gene Dodaro, acting head of the GAO, said the Fed and Treasury could provide loans to the struggling U.S. automakers under an emergency loan designation.

The above ruling conflicts with the view of U.S. Treasury Secretary Henry Paulson, who has said that the $700 billion in TARP funds administered by the Treasury Department can only be used for financial companies.

However, Dodaro said the TARP legislation "is worded broadly enough" to allow Treasury to lend money to General Motors, Ford, and Chrysler, marketwatch.com reported.

Shares of GM (NYSE: GM) fell 33 cents to $4.57 while Ford (NYSE: F) fell 4 cents to $2.81 on Thursday at mid-day.

The dollar fell, then firmed, against most of the world's other major currencies Tuesday at mid-day, on word of yet another U.S. government intervention to ease the financial crisis. (For full currency data, click here.)

Still, the more important theme, many economists and analysts agree, is how well the dollar has fared given the remarkable increase in debt by the United States and the supply of dollars globally.

The dollar weakened about one cent to $1.3040 versus the euro and about half a cent to $1.5160 versus the British pound on Tuesday at mid-day, after the U.S. Federal Reserve announced it would buy up to $600 billion in mortgage and mortgage servicer-related debt and up to $200 billion in consumer and small business-backed loans, to free up credit in these sectors. The dollar also fell about one cent to 95.53 versus Japan's yen, and about half a cent to $1.1881 versus the Swiss franc.

Under the new programs announced Tuesday, the U.S. Treasury will provide about $20 billion in credit protection to the U.S. Federal Reserve, using money from the $700 billion Troubled Asset Recovery Program (TARP).

In September, the Fed's balance sheet totaled $924 billion, when the first wave of the financial crisis began to freeze credit markets and decimate stock markets around the world. However, if all loan guarantees are accessed, and if all of the remaining $780 billion debt is added to the Fed's balance sheet, that balance sheet would increase to about $3 trillion.

No mainstream economist or analysts thought the United States financial system and economy would ever face circumstances like these, but fundamentals and a negative spiral have worsened to such a degree that the nation may have to implement a temporary, home mortgage foreclosure for all mortgages, according to an economist.

Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) have already announced a six-week halt to foreclosures and evictions through the holidays, lasting until January 9, to give the servicers time to implement their own program for at-risk mortgages, Bloomberg News reported. The government-sponsored enterprises own or guarantee $5.2 trillion of the $12 trillion U.S. home mortgage market.

National moratorium needed?

Economist Richard Felson told BloggingStocks a national moratorium on the remaining roughly $7 trillion in mortgages would give the incoming Obama Administration time to play-catch up, after the Bush Administration's underperformance on a universal, streamlined mortgage refinancing program. If implemented, the plan would end the rise in home foreclosures that's causing the securities defaults that are elongating the financial crisis.

With credit markets remaining under stress, and with uncertainty growing regarding the status of megabank Citigroup (NYSE: C), the U.S. Congress may have to take more action to maintain financial system stability and prevent the U.S. economy from spiraling into a deeper recession, so says economist David H. Wang.

"The U.S. Congress may have to approve a 'TARP 2,'" Wang told BloggingStocks Friday. "Whether Congress does it as part of a fiscal stimulus package, or separately, it is clear we will need more money to purchase toxic assets, improve bank capitalization and allocate funds for home mortgage refinance programs, and other financial stabilization measures. At this stage of the crisis, the $700 billion TARP is not going to be enough, in my interpretation."

Bank sector stress remains

Wang said that if Citigroup, whose CEO Vikram Pandit said has adequate capital, for some reason cannot, when needed, find additional capital in the private sector, then "the Fed and or U.S. Treasury will step in, and take necessary measures to stabilize the bank," Wang said. If the U.S. Treasury is the primary funder, "that action, and other forthcoming, planned actions by the Treasury may use up a considerable amount of TARP funds, requiring a TARP 2."

Most investors know that there's a difference between Democratic Party leadership and Republican Party leadership, as it relates to U.S. fiscal and economic policy.

However, although more economically-cohesive than the Democratic Party, the Republican Party is not monolithic, and there's perhaps no better example of these often nuanced differences in policy than the positions on home mortgage assistance policy held by U.S. Treasury Secretary Henry Paulson, and FDIC Chairman Sheila Bair.

Paulson has been slow on payment relief

Although he has shown support for mortgage refinance programs aimed at achieving lower payments - - 'payment relief' in Washingtonspeak - - Paulson has steered clear of policies that would mandate that banks unilaterally lower principals, or interest rates, preferring to stick with a voluntary approach, whereby banks basically negotiate with borrowers on a case-by-case basis.

That traditional Republican response, economist David H. Wang said, "has prevented mortgage refinancings from occurring for those who don't truly need them," but it also has increased the at-risk mortgage pool, delaying the housing sector's recovery.

A solution to the above, in Wang's view? Adopt the FDIC plan backed by Bair, whereby the Treasury would use its funds to speed refinancings for at-risk homeowners in owner-occupied homes. Wang agreed with Bair that the FDIC plan could prevent 1.5 million foreclosures by the end of 2009.

"It could prevent even more, perhaps as many as 1.8-2 million foreclosures, and until the U.S. ends these waves of foreclosures, very little good news will occur from a GDP standpoint, which is why Bair's plan should be enacted," Wang said. "I also think President-elect Obama should appoint her to a Special Advisor post in the Obama Administration, solving the home foreclosure problem is that critical to the nation's economic health."

Yet another milestone has been reached in the ever-evolving global economy: China has passed Japan to become the largest foreign owner of U.S. Treasuries, the U.S. Treasury Department announced Tuesday.

China added $43.6 billion in U.S. Treasuries in September to about $585 billion in U.S. government debt, ahead of Japan's $573 billion.

Economist David H. Wang says the increased demand for U.S. Treasuries reflects both a global trend and an effort on China's part to increase high-rated bond holdings.

"In general, of course, during the financial crisis we've seen a global flight-to-safety by institutional investors, which has increased demand for U.S. government bonds," Wang said. "Also, China has made it known that it will be adding to existing U.S. bond positions, and the September data is further confirmation of this investment stance."

That global demand, led by China, has enabled the United States to have perhaps the most unique of all possible financing circumstances: moderate interest rates to finance its debt despite rapidly increasing borrowing to pay for the U.S. bank rescue and related financial stabilization programs, Wang said. For example, despite record government borrowing, the yield on the 10-year U.S. Treasury note is lower today, at 3.68%, than it was in August, 3.88%.

It's one of those statistics, or 'numbers' as they are called in Wall Street circles, that's likely to be etched in the memory of those who were around during the United States' difficult decade - - its decade of descent.

The U.S. Government's budget deficit soared to a record $237.2 billion in one month -- October -- as the federal government invested more than $136 billion in bank and related rescue programs, the U.S. Treasury Department announced.

Bank rescue: one-time charges (hopefully)

Of course, the federal government isn't expected to borrow and invest an additional $136 billion every month -- a large amount of borrowing was expected at the start of the U.S. Government's effort to end the financial crisis -- but this past October's total is four times the size of the $56.8 billion in borrowing required in October 2007.

In July, the Bush Administration estimated that this year's budget deficit, fiscal 2009, would total $482 billion, but that projection was formulated before Congress passed the $700 billion rescue program on October 3.

In the quarters ahead, new autos may not be the only inventory item piling up.

A 'really big ticket item' -- new commercial airplanes -- may start piling up, as well. Boeing and Airbus may end up with as many as 200 new planes without buyers in 2009 because airlines are unable to obtain funds to pay for them, due to the credit crunch.

In the second half of 2008, banks and other sources of capital decreased lending to airlines -- and to just about everyone else, it seems -- on concerns the loans won't be paid back. Other banks are decreasing lending primarily as a means of rebuilding damaged balance sheets.

The lending cutback may create a funding gap of about $65 billion at Boeing next year, and a $20 billion gap at Airbus. Boeing Capital Corp., the airplane manufacturing giant's financing unit, is expected to make $1 billion in loans to customers in 2009.

Talk about a large amount of funding in a quarter.

The U.S. Treasury Department, weighed down by unprecedented obligations for the bank rescue and a slowing economy, is expected to borrow a record $550 billion this quarter, compared to the pre-financial crisis estimate of $142 billion, the department announced.

Further, the $550 billion bond issuance follows a record $530 billion in borrowing in Q4 of fiscal 2008, which ended September 30.

In addition to the bank rescue and related programs, the slowing U.S. economy has also increased Treasury borrowing by reducing federal receipts and increasing outlays.

The U.S. Government closed fiscal 2008 with a $407 billion deficit, according to the Congressional Budget Office (pdf). The CBO projects a $438 billion deficit for fiscal year 2009, but economist Richard Felson said the total is likely to approach $1 trillion if the bank recapitalization and toxic asset repurchases proceed along outlined timetables.

"These are staggering sums of debt and it's hard to envision the dollar holding up long-term, given such borrowing," Felson said.

The U.S. Treasury and FDIC are said to be close to agreement on a plan that would have the U.S. government guarantee mortgages of millions of distressed homeowners.

The plan, which could place as many as three million homeowners in affordable mortgages, would require lenders to restructure mortgages based on the borrower's ability to repay. In exchange, banks / lenders would receive a federal guarantee that the loan would be repaid; program guarantees are estimated at $500 billion.

Program goal: Address toxic asset source

Economist David H. Wang told BloggingStocks Thursday a Treasury / FDIC or comparable plan is needed because to-date too few lenders have refinanced terms for preventable foreclosures, creating a steady stream of foreclosures into the financial system pipeline.

"They'll be little improvement in the toxic asset situation until we address the source of toxic assets, which is foreclosures," Wang said. "It's an economic imperative that we do this."

Just call it a case of a need to strengthen a hospital patient with IVs to make him strong enough for a much-needed operation. The Treasury and FDIC need to do more to stem the tide of home foreclosures -- foreclosures that are a major source of the currently afflicting credit markets -- so says an economist.

"Stress and fear, although at lower levels, remain a pervasive feature of credit markets, with above-normal, short-term interest rates, and bank-to-bank suspicion," economist Richard Felson said Monday. "This stressed condition in credit markets is just going to linger until we shut off a major portion of the source of toxic assets -- home foreclosures."

Felson said the U.S. Federal Reserve and U.S. Treasury, in conjunction with their companion major central banks and governments abroad, have done "a decent job" addressing two, key dimensions of the financial crisis: maintaining market liquidity and lowering interest rates to assist the recovery.

Progress in two other areas -- buying toxic assets and ending the pattern of home foreclosures -- has been less impressive, he said.

Most economists agree that keep global financial markets liquid - - and filled with dollars - - is an important part of the effort to end the global financial crisis.

Further, along with the removal of toxic assets from bank and financial institution (FI) balance sheets, stemming the rise in home foreclosures among borrowers capable of servicing their mortgages is another key to ending both the financial crisis and the home foreclosure/asset price decline cycle, many economists agree.

Moreover, it looks like federal officials and banks - - after a slow start - - will launch a new, major program to keep more families in their homes. The federal government may start guaranteeing home mortgages to persuade lenders to modify home loans, the chairwoman of the Federal Deposit Insurance Corporation said, Reuters reported Friday.

FDIC Chairwoman Sheila Bair said that under a program her agency and the U.S. Treasury Department are working on, a bank/lender would be required to significantly drop the interest rate, reduce the principal or extend the life of affected loans, The Washington Post reported Friday. In return, the bank/lender would get a government guarantee that the mortgage would be repaid.

Bair, in testimony before the Senate Banking Committee, could not provide an estimate regarding how much the program would cost, but underscored that the bank rescue program passed by Congress earlier this month give the Treasury power to use loan guarantees and credit enhancements to modify loans to prevent avoidable foreclosures, Reuters reported Friday.