The Dow Jones industrials surged nearly 400 points in its eighth-largest gain in history. Broader stock indices also moved sharply higher. The Standard & Poor's 500 index posted its best start to a second quarter since 1938.
Stocks managed to keep their heads above water most of the week despite subsequent government reports revealing a steeper-than-expected decline in factory orders in February and the nation's unemployment rate had risen to 5.1 percent.
Testifying before the Joint Economic Committee on Wednesday, Federal Reserve chairman Ben Bernanke presented his most pessimistic assessment of the U.S. economy to date. And against a backdrop of unparalleled turbulence, the Bush Administration is calling for an overhaul of the regulatory structure of the nation's financial and commodity markets.
The unprecendented move by the Bush Administration to establish new powers for the Federal Reserve including increased oversight of the mortgage industry and a larger role in market stabilization, a new federal bureau for the insurance industry, and widespread consolidation of other banking agencies.
Critics have blasted the proposal as "too much regulation" or "not enough government intervention" but Paulson sought to defuse those sentiments.
Sec. Henry Paulson, Treasury Department: "I am not suggesting that more regulation is the answer, or even that more effective regulation can prevent the periods of financial market stress that seem to occur every five to ten years. I am suggesting that we should and can have a structure that is designed for the world we live in, one that is more flexible, one that can better adapt to change..."
Paulson hailed the proposal as the largest move since the Great Depression to adjust government oversight of a rapidly-changing economy. The move comes amidst the nation's largest credit crisis in more than two decades but Paulson stressed the federal government should first dampen current market turmoil before tackling a broad overhaul.
Sec. Henry Paulson, Treasury Department: "We agree that the realities of the current marketplace for securities and futures products make it increasingly difficult to rationalize a separate regulatory regime. And, we believe that we should pursue moving our regulation in the direction that the markets are taking us."
The consolidation of five agencies down to one governing body would require congressional approval. And lawmakers in farm country have bristled at the idea of abolishing the Commodities Futures Trading Commission.
Senate Agriculture Chairman Tom Harkin warned the proposal was "misguided". Republican Senator Saxby Chambliss voiced concern that farmers and ranchers "may not continue to receive adequate attention" towards the commodity markets.
The CFTC, the regulatory agency in charge of monitoring America's commodity futures and option markets, also warned the move "may ironically make the U.S. futures industry less competitive and run counter to the explicit goal of this important endeavor."
Treasury Secretary Paulson concedes that lengthy congressional debate on the proposal could stretch into 2009 when a final decision would rest in the hands of a new administration.