All eyes on Fed after bleak Monday

WASHINGTON, Sept. 16 (UPI) -- Turmoil in the financial markets Tuesday overshadowed the U.S. Federal Reserve Bank's regularly scheduled meeting following Monday's market shifts.

Stocks tumbled Monday after Lehman Brothers declared bankruptcy, Merrill Lynch was rescued by Bank of America in a $50 purchase and the country's largest insurance company, American International Group, found solace when New York regulators allowed it to tap $20 billion of its own restricted, subsidiary resources.

The reverberations created a blitz of selling that pulled the Dow Jones industrial average down 504 points in its worst one-day fall since Sept. 17, 2001, when it lost 684.81 points, The Washington Post reported.

Investors will be watching for the Fed to lower rates, as it did in 2001 to quickly restore calm to markets. On Monday, the Fed expanded two lending programs and relaxed rules to make it easier for regular banks to purchase investment banks, the Post reported.

In the turmoil, a record 8 billion shares traded hands Monday, including a sudden sell-off at the end of the day that pushed indexes down further.

"In the long run, I'm confident that our capital markets are flexible and resilient, and can deal with these adjustments," President Bush said Monday.