'Economy's Main Engine' Now in Idle

An oversupply of new homes on the market and tighter lending standards that have driven down home prices will continue to hamper the housing market through this year, said Jeffrey Mezger, KB Home president and chief executive. "It is likely to take some time for the market to absorb the current excess housing supply and for consumer confidence to improve," he said in a statement.

The Fed said yesterday that it will loan another $100 billion to banks in short-term cash over the coming three weeks, the latest step in its continuing efforts to try to keep financial institutions from hoarding cash. It will offer $50 billion each in two installments of its "term auction facility," introduced in December.

Meanwhile, battered investment bank Lehman Brothers got a vote of confidence yesterday from Citigroup Global Markets, which upgraded the firm's stock from hold to buy. Rumors circulated this week that Lehman Brothers might be short of cash, which it denied.

In a research note yesterday, however, Citigroup analyst Prashant Bhatia said the company's prospects were buoyed by access to loans from the Federal Reserve and the strong track record of its management team. It's "tough to have a liquidity-driven meltdown when you're being backed by government entities that have the ability to print money," the note said.

The company's stock fell 84 cents, or 2 percent, to close at $37.87.

Staff writer Neil Irwin contributed to this report.