Andrew Torgan
CNN Financial News Producer

Officials in Washington today launched their biggest offensive yet in the war on runaway pay practices in the financial industry, targeting everyone from corporate executives to high-flying traders of complex securities.

The Federal Reserve proposed a sweeping review of pay policies at 28 of the nation's largest banks as part of an effort to make sure employees are not tempted to make the kinds of bets that could put their company at risk of going under.

The central bank said it also planned to review compensation practices at the thousands of regional lenders that make up the bulk of the nation’s banking industry as part of its standard review process.

Separately, the Obama Administration's so-called “pay czar,” Kenneth Feinberg, unveiled sweeping pay cuts for 136 top executives at the seven biggest companies that received a bailout.

Feinberg is demanding that AIG, Bank of America, Citigroup, Chrysler, General Motors, GMAC and Chrysler Financial slash compensation packages for their top 25 most highly-compensated employees by about 50%.

The bulk of those cuts will come from annual salaries, which are expected to fall 90% on average.

Today’s developments represent what is perhaps the most sweeping push yet by Washington to rein in Wall Street’s pay practices. But some compensation experts warn that the actions could have a disastrous series of unintended consequences, including the loss of top employees to companies that are not subject to government restrictions.

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Emanuella Grinberg
CNN

Stephan Mace of the Army's 61st Cavalry Regiment knew the Taliban would be waiting for him when he returned to eastern Afghanistan in September.

During a two-week leave in early September, the 21-year-old specialist sat on his father's couch in Winchester, Virginia, and discussed his concerns over Forward Operating Base Keating in Kamdesh District, a region known as a Taliban stronghold.

"He talked about the village next to the base, that it had 300 Taliban, and they couldn't do anything about it because they were in mosques hiding or with other civilians," says his father, Larry Mace.

Click here to keep reading and view more pictures of remembered fallen heros.

GM reveals its first electric car, the Chevy Volt.

Andrew Torgan
CNN Financial News Producer

General Motor' says its Chevrolet Volt, the electric-drive car that's expected to go on sale in late 2010, is projected to get an estimated 230 miles per gallon in city driving.

That exceptionally-high government mileage rating could give the Volt a major boost. For the first time, car buyers will easily be able to compare electric cars with ordinary gas-powered cars.

"Having a car that gets triple-digit fuel economy can and will be a game changer for us," GM CEO Fritz Henderson said this morning at a press conference showing off the ‘Volt.’

Determining fuel economy for what is primarily an electric car is a tricky matter, and General Motors has been working with the Environmental Protection Agency for years on the issue.

Basically, you will be able to drive the Volt for about 40 miles using its lithium-ion batteries. For those driving less than that, gas mileage is essentially unlimited. It is only after 40 miles that the Volt will start using gasoline.

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Andrew Torgan
CNN Financial News Producer

It’s an extremely busy day on Capitol Hill.

Fed Chairman Ben Bernanke is testifying before the House Financial Services Committee this morning, delivering his semi-annual report on the economy.

Bernanke told lawmakers that the economy has started to show signs of stabilization, although he cautioned that improvement is uncertain and likely to be gradual going forward. He also said the unemployment rate would be higher than preferred levels until at least 2012, but added that steps taken by the Fed to pump money into the economy have started to pay benefits.

Some lawmakers are questioning those steps taken by Bernanke and Co. however, arguing the economy has not yet taken a turn for the better for most Americans.

And down the hall, the oversight czar tracking the $700 billion bailout told lawmakers that he's concerned officials are not doing enough to prevent tax dollars from being wasted or pilfered.

Neil Barofsky, the special inspector general overseeing the Troubled Asset Relief Program who is testifying before a House Oversight panel, says officials should keep better tabs on how banks are spending taxpayer dollars.

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Ali Velshi
CNN Chief Business Correspondent

What we saw happen in the hours after the Fed injected a trillion dollars into the economy last Wednesday was confirmed today.  Rates for a 30-year fixed mortgage dropped to 4.63%.

"Mortgage rates fell sharply to low levels not seen in six decades following the Federal Reserve's announcement on the Treasury bond and mortgage-backed securities purchase programs," the Mortgage Banker's Association reports.

But that's not all: on TOP of the uptick we saw on Monday in existing home sales, and on TOP of the banking plan that was finally detailed on Monday, orders for durable good were up.  Durable goods are manufactured goods that are built to last more than 3 years.  Everything from washing machines to military equipment.

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Scott Spoerry
Senior Producer, CNN Washington

When Ben Bernanke told the Senate Budget Committee that American International Group (AIG) "exploited a huge gap in the regulatory system” and that “there was no oversight of the Financial Products division," it seemed to make sense. The Federal Reserve Chairman went on to say, "This was a hedge fund basically that was attached to a large and stable insurance company."

If nobody was keeping an eye on them, well no wonder it blew up.

But it turns out Mr. Bernanke was not quite accurate when he said “no oversight.” He made that statement on March 3rd.

Just two days later a man hardly anybody has ever heard of explained to yet another Senate committee that - hold the presses - there WAS a regulator for the Financial Products unit of AIG. (By the way, everyone just calls it FP now…that saves time and makes it sound like we know what we’re talking about).

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William M. Isaac
The Wall Street Journal

People who should know better have been speculating publicly that the government might need to nationalize our largest banks. This irresponsible chatter is causing tremendous turmoil in financial markets. The Obama administration needs to make clear immediately that nationalization - government seizing control of ownership and operations of a company - is not a viable option.

Unlike the talking heads, I have actually nationalized a large bank. When I headed the Federal Deposit Insurance Corporation (FDIC) during the banking crisis of the 1980s, the FDIC recapitalized and took control of Continental Illinois Bank, which was then the country's seventh largest bank.

The FDIC purchased Continental's problem loans at a big discount and hired the bank to manage and collect the loans under an incentive arrangement. We received 80% ownership of the company, which increased to 100% based on the losses suffered by the FDIC on the bad loans.

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Paul Krugman
The New York Times

By now everyone knows the sad tale of Bernard Madoff’s duped investors. They looked at their statements and thought they were rich. But then, one day, they discovered to their horror that their supposed wealth was a figment of someone else’s imagination.

Unfortunately, that’s a pretty good metaphor for what happened to America as a whole in the first decade of the 21st century.

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Andrew Torgan
CNN Financial News Producer

The Fed today is widely expected to lower its key shot-term interest rate by a half point to 0.5%, the lowest level on record. It would be the 10th rate cut since Sept. 2007 as the central bank continues the most sweeping effort to stabilize the economy in its history. The decision is expected around 2:15 p.m.

Consumer prices plunged in November by the largest amount on record as energy costs posted nearly double the decline of the previous month. The Consumer Price Index - a key reading of inflation - fell 1.7% last month, surpassing the previous record decline of 1% set in October. Both drops were the largest one-month declines on record dating to February 1947, reflecting the effects of the recession gripping the country.

Construction of new homes plummeted in November by the largest amount in nearly a quarter-century, as builders slashed production in the face of an economy in recession. Housing starts fell nearly 19% last month, the steepest drop since March 1984.

Former Wall Street powerhouse Goldman Sachs posted its first loss as a publicly traded company, serving as yet another reminder that no corner of Wall Street has escaped the ongoing financial crisis. The investment bank said it lost $2.1 billion during the fourth quarter - its first loss since it went public in 1999. Rival Morgan Stanley reports earnings on Wednesday.

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The Fed began its last meeting of 2008 today, where it is expected to announce another reduction in the key interest rate.

Ali Velshi | Bio
CNN Chief Business Correspondent

The Federal Reserve is widely expected this afternoon to cut interest rates for the 10th time in just over a year, driving the rate it controls close to zero as it continues the most sweeping effort to stabilize the economy in the history of the central bank.

The federal funds rate, at which banks lend to each other, is already at 1 percent. The Fed is expected to drop it to half a percent, or even lower, at the end of its policymaking meeting today. That would be the lowest U.S. rate on record.

Here are some bullet points:

The Fed's extraordinary measures to calm the economy:

• Cut interest rates
• Inject funds into system
• Buy up short-term debt
• Bail out financial firms

Why does a rate cut matter?

• Money is cheaper to borrow
• Businesses expand, hire more
• People save on lower rates
• Consumers able to spend more

Interest rates right now:

• Fed Funds Rate: 1.0%
• Prime Rate: 4.0%