Ever had too much to drink and been cut off by a bartender? Federal Reserve Chairman Ben Bernanke did the same thing to the U.S. economy today, and investors reacted as if they had been denied their favorite alcoholic beverage, angrily sending the stock market tumbling.

In a speech today to the International Monetary Conference in Barcelona, Bernanke pointed out that the Fed has "eased monetary policy substantially and proactively to address the sharp deterioration in financial conditions and to forestall some of the potential adverse effects on the broader economy. . . . For now, policy seems well positioned to promote moderate growth and price stability over time. We will, of course, be watching the evolving situation closely."

Bernanke also expressed concerns about the weak U.S. dollar, which has helped boost the earnings of some large multi-national companies. The Fed is "attentive" to the implications of the declining greenback for inflation and inflation expectations. In other words, investors expecting yet another Fed interest rate cut should not hold their breaths. Bernanke is going to close the candy store sooner rather than later.

But unfortunately for investors, this news came amid growing worries that Lehman Brothers Inc. (NYSE: LEH) may report its first quarter loss and raise billions in new capital. This comes a day after Wachovia Corp. (NYSE: WB) ousted its chief executive Ken Thompson. Shares of Merrill Lynch & Co. (NYSE: MER), Morgan Stanley (NYSE: MS) and Bank of America Corp. (NYSE: BAC) also tumbled.

This really may be the last call for lower interest rates for a while. A bartender realizes that drunks will keep buying as many drinks as they pour. But the benefits of increasing the bar's bottom line are outweighed by the dangers caused by an intoxicated person getting behind the wheel of a car. The same tough love is being applied to investors and though it may be painful at first, it's the right thing to do in the long run.

The Independent reports that Citigroup's (NYSE: C) Smith Barney took the $100,000 entrusted to it by a 76-year old mother and put it in now-illiquid Auction Rate Securities (ARS) -- bonds whose interest rates are supposed to reset in weekly auctions -- without her understanding. After she died earlier this year, her son discovered that what she had told him was "in an easy-to-sell money market fund" was in fact frozen in ARSs.

Since February, when I first posted on the $330 billion ARS market, a forum has gathered with 3,924 comments from people who have much of their savings frozen. This widow, like many of the people who comment there, had their money moved into ARSs without their knowledge or with the assurance that the money would be safe and would offer a higher than average return. One key question: Did ARS purchasers receive prospectuses or know of their risks?

But last year, an accounting rule change caused demand for ARSs to evaporate since companies could no longer account for them on their balance sheets as "cash equivalents." So the banks started to bid on the auctions themselves to keep the market going. But thanks to the credit crunch, banks no longer had sufficient capital to prop up the market. So the auctions failed and thousands of people, like this widow, have found that they can't get their money.

In August I posted on the danger that subprime mortgages pose to people who invest in money market funds. Today, the New York Times reports that several such funds have invested in commercial paper (CP) issued by Structured Investment Vehicles (SIVs) backed by subprime mortgage-backed securities (MBSs). I think all money market funds should start a public information campaign to let people know if they have the SIV virus and if so, what they're doing to protect their customers from it.

Earlier, I posted on all the new vocabulary words I've learned in the last year thanks to the subprime mortgage meltdown. This $1.3 trillion market consists of mortgages to people who can't afford to repay in many cases. Forty seven percent of the loans were made without documentation of the borrower's income -- these are known as liar loans. The subprime mortgages were packaged as MBSs and among the buyers were SIVs -- off-balance sheet entities that use a bank's good credit rating to issue CP to invest in MBSs.

Thanks to the subprime mortgage meltdown, the CP is not worth as much as before so the money market funds that bought it are now forced to break the $1 per share constant value or put money into the fund to make up for the lost value. So far, analysts say that most SIV securities are trading at 97 to 98 cents on the dollar. But if more SIVs are forced to unwind, the resulting fire sale would put pressure on prices.