Here is Ed Yardeni's very interesting take:

I know what Ben Bernanke will do next, and it should be very bullish for stocks, bonds, commodities, and real estate. He soon will target the 10-year Treasury yield at 2.50%. It was at 3.40% yesterday. That would immediately bring the mortgage rate down to 4%-5%. The inventory of unsold existing and new homes will plunge as homebuyers swarm back into the real estate market. Home prices would stop falling, and might start rising again. The stock market would jump 25% within a few days. By the spring of 2009, housing starts and auto sales will rebound. The worst of the recession will be behind us after the first quarter of next year.

How do I know all this? Ben told me. He told everyone. He said he would do this under certain dire circumstances, which are rapidly unfolding right at this time...

So what is the Fed to do? Here is what Ben Bernanke said he would do under these circumstances back in 2002: “One relatively straightforward extension of current procedures would be to try to stimulate spending by lowering rates further out along the Treasury term structure--that is, rates on government bonds of longer maturities. There are at least two ways of bringing down longer-term rates, which are complementary and could be employed separately or in combination. One approach, similar to an action taken in the past couple of years by the Bank of Japan, would be for the Fed to commit to holding the overnight rate at zero for some specified period. Because long-term interest rates represent averages of current and expected future short-term rates, plus a term premium, a commitment to keep short-term rates at zero for some time--if it were credible--would induce a decline in longer-term rates. A more direct method, which I personally prefer, would be for the Fed to begin announcing explicit ceilings for yields on longer-maturity Treasury debt (say, bonds maturing within the next two years). The Fed could enforce these interest-rate ceilings by committing to make unlimited purchases of securities up to two years from maturity at prices consistent with the targeted yields. If this program were successful, not only would yields on medium-term Treasury securities fall, but (because of links operating through expectations of future interest rates) yields on longer-term public and private debt (such as mortgages) would likely fall as well.”