Fed Cuts Discount Rate on a Sunday Open Thread

The Wall Street Journal reported moments ago:

In an extraordinary weekend intervention, the Fed announced the most dramatic expansion yet of its lending, promising to lend for up to six months to securities dealers under terms normally reserved only for tightly regulated banks.

The central bank also cut the rate on such direct loans by a quarter of a percentage point, just two days before it is likely to slash interest rates more broadly. It also made a rare weekend cut in the discount rate -- ordinarily charged on direct loans to banks, and now also to securities dealers -- to 3.25% from 3.5%, while helping bring Bear Stearns into the arms of J.P. Morgan Chase.

This is a truly rare weekend event according to Forbes:

Its 'Sunday Surprise' shows the Fed's crisis control urgency. Ashraf Laidi of CMC Markets said, 'the last time the Fed did any sort of weekend announcement was the infamous 'Saturday Night Special' pulled off by the Volcker Fed in October 1979 to target money supply rather than interest rates in the battle against inflation.'

When the Federal Open Market Committee meets on Tuesday, it is expected to lower rates by an additional 50 to 100 basis points. With this in mind, just how bad is the current liquidity crisis, and what's the next shoe to drop?

Also, do you think the Fed should be bailing companies like Bear Stearns out, or should they let the chips fall where they may regardless of the possible impact to the economy?