(12-09) 02:33 PST WASHINGTON (AP) —

A lot has changed since the Federal Reserve hinted two months ago that it might be finished cutting interest rates for a while. Credit has become harder to obtain, Wall Street has convulsed again and the housing slump has intensified. As a result, policymakers at the central bank now appear to have changed their minds about the need to drop interest rates again.

The Fed had cut rates twice this year and officials suggested in October that might be enough to help the economy survive the credit and housing stress. Then the problems snowballed, leading Fed Chairman Ben Bernanke to signal that one more cut might be needed.

Analysts expect the Fed to trim its key rate, now at 4.5 percent, by one-quarter of a percentage point at the meeting Tuesday. Some even speculate about the possibility of a half-point cut.

Banks, financial companies and other investors who made loans to people with spotty credit or put money into securities backed by those subprime mortgages have lost billions of dollars. Investors in the U.S. and abroad have grown more wary of buying new debt, thereby aggravating the credit crunch.

All this has added to the turmoil on Wall Street, and Bernanke and other Fed officials say they must take it into account when deciding their next move.

But does lowering rates mean the Fed essentially is bailing out investors or encouraging more sloppy decision-making? In other words, what exactly is the Fed’s job?

Bernanke and other Fed officials say it is to make policy that keeps the economy growing and inflation low, a stable climate that benefits individuals, businesses and investors. The Fed also has a responsibility to ensure the banking system is sound and financial markets run smoothly.

“There is a link between Wall Street and Main Street. The Fed is taking the right actions, but they should be careful,” said Victor Li, an economics professor at the Villanova School of Business.

England are handily placed, no more than that. They might have been mightily placed. Two freakish dismissals, allied to a timid innings from Ian Bell and at least one dodgy umpiring decision on a sultry Colombo afternoon, punctured England’s momentum. They are still right in the game, but they are not dominating it. On another day they might have been.

The first dismissal, that of Michael Vaughan, was plain unlucky. Vaughan had batted silkily after winning the toss and opting to bat. Not since England’s tour of Australia in 2002-03 have we witnessed such fluency. The cover-drive purred to the boundary and that dismissive, trademark pull shot was unfurled after Dilhara Fernando had dropped a shade short. Moreover Muttiah Muralitharan was causing, by his standards, few problems. Vaughan had just clipped him through midwicket and cut him imperiously to the cover boundary when his luck ran out.

Vaughan spied another shortish delivery and off the meat of the bat he flicked the ball to the on-side. It hit Jehan Mubarak at short leg somewhere near the box and then trickled downwards before lodging between his legs around the knee region. Carefully, jubilantly, Mubarak extricated the ball - the first time he had made use of his hands in this manoeuvre - and a stunned Vaughan had to drag himself from the crease.

Thereafter, the impetus of the innings was gone. Given how positive Ian Bell had been in his first knock at Kandy, it was a surprise that he should bat so tepidly. England may have been 150 for one but they already seemed in survival mode. After all that reconnaissance it was galling when Bell was taken - in more conventional style- at forward short leg just after tea. Next came the wicket that set the arguments rolling.

Kevin Pietersen was/is the one man - besides the rejuvenated Vaughan - who might take the Sri Lankan attack apart. Here he was still bedding in when he edged a full-length delivery from Chaminda Vaas towards the slip-cordon. Chamara Silva dived to his left, the ball bobbled from his left hand, not once, but twice before the ever-alert Kumar Sangakkara, who was at first slip, snatched it.

The umpires conferred before Daryl Harper raised his finger. Pietersen reluctantly set off for the pavilion, but stalled after remonstrations from the English dressing room. This had happened to Pietersen before - at Lord’s against India last summer. On that occasion the third umpire was eventually summoned by the on-field umpires. Here the umpires after another conference stuck with their original decision. Harper raised his finger again.

So the replays were studied time and time again. As ever the cameras cast doubt, suggesting that the ball might have touched the ground when Silva made his first attempt to make the catch. Had it been referred to the third umpire Pietersen would have been reprieved but the umpires are now directed only to refer this sort of decision if their line of sight has been impeded. Past experience has taught us that the camera can lie. The naked eye suggested that Pietersen was legitimately caught, slow motion otherwise. Afterwards Michael Vaughan expressed his disappointment. He thought that the decision should have been referred.

While the arguments raged, Cook plodded on nobly. His was a gutsy effort in the light of his two failures in Kandy but he could not quite make it to the close. He was adjudged lbw by umpire Harper to Malinga, who had just taken the second new ball. This time there was little doubt from the replays. The ball looked destined to miss Cook’s leg stump. With the very next delivery, Malinga struck again, dimissing the newly-arrived Ravinder Bopara with a perfect yorker. All the while Paul Collingwood remained calm and productive; Matthew Prior hung on alongside impressively as dark clouds amassed. Meanwhile the mood in the English dressing room was equally dark. The challenge now for the England hierarchy was to ensure their players focussed on the days ahead rather than their grievances on a taut first day.

December 9, 2007 — Dear John: I am now 55 years old and have received $200,000 from my recent divorce. I am getting conflicting advice as to how to proceed in buying a condo. One side says pay for it outright, while the other suggests leaving the money in the bank and paying a mortgage with the interest.

At my age - getting closer to retirement - this is a vexing problem. I hope you might shed a little light on the subject. C.M.

Dear C.M.: Close to retirement? At 55? You have plenty more years of work ahead of you.

Oh, you probably didn’t want to hear that.

Anyway, back to your question.

Michael Esposito, a CPA with New York-based Kleiman & Weinshank said that “even if this person takes out a mortgage and invests the $200,000, in most cases the interest expense on the mortgage will exceed the investment income on the invested funds.”

In other words, if you think you can achieve a better rate of return on your $200,000 investment than you will be paying for the mortgage - after tax considerations - then take out a loan.

If you can’t do better than, say, 5.75 percent (the current average 30-year mortgage rate, then pay cash.

“The decision probably comes down to this person’s personal preference and comfort level, says Esposito. “He has to determine how much ‘rainy day’ money he will need, or feel comfortable having, in the bank for her future.

Esposito suspects you’ll ultimately decide to invest some of the $200,000 and take out some mortgage - in other words the cowardly middle ground that most of us would go for.

Dear John: My mother, age 87, owned a large number of series E bonds bought many years ago. She converted them into Series HH bonds under joint ownership with my brother or myself.

The HH bonds are worth about $500,000. Because the taxable interest from the E bonds was deferred by trading them into HH bonds, there will be tax due when the bonds are sold.

The interest on the HH bonds is only 1.5 percent - next to nothing. But if my mother cashes them in she will be socked with a huge amount of deferred taxable interest from the original E bonds. It’s a Catch-22 situation. E.B.

Dear E.B.: There’s no easy answer to this.

“This is classic poor tax planning,” says John R. Lieberman, a Big Apple CPA. Because the interest on these bonds is considered income, even if your mother died and passed her estate down to you and your brother the tax obligation would not go away.

And that gets us to when the bonds should be redeemed. If your mother’s income tax rate is lower than yours is then cashing in the bonds now would cost you less in taxes.

Send your questions to Dear John, The N.Y. Post, 1211 Ave. of the Americas, N.Y., N.Y., 10036, or john.crudele@nypost.com.