(Continued from page 33)

• But in the short run, traders fear that higher rates could slow growth and that the Fed might be moving too fast to slow its stimulus, according to many of the economists. Some also think investors perceived a shift in the Fed's timetable for curtailing its low-rate policies.
• The Fed has been buying $85 billion a month in bonds to try to push down long-term borrowing rates to spur spending. On Wednesday, Chairman Ben Bernanke said the Fed will likely slow its bond-buying program later this year and end it next year because the economy is improving. That signal came earlier than some expected.
• The Fed has also said it plans to keep its benchmark short-term rate near zero at least until the unemployment rate reaches 6.5 percent. It's now 7.6 percent. On Wednesday, it forecast that unemployment could reach 6.5 percent as early as the end of next year -- sooner than previously forecast -- and that the economy will grow faster than they thought three months ago.
• ___

• CHICAGO (AP) -- Like your cousin who doesn't pay his bills on time and squanders money he doesn't have, Illinois is paying the price -- in both cash and reputation -- for years of ignored warnings about its pension crisis, the worst in the nation.
• Largely because of its unfunded retirement plans, Illinois has replaced longtime bottom-dweller California as having the lowest credit rating of any state. So when Illinois tries to borrow money, it faces the same problem as the spendthrift cousin: far higher interest rates.
• The state's financial failings are so well-known, they have inspired a name on Wall Street -- the "Illinois effect," a reference to the fact that cities, universities and other bond-issuing entities here must pay more in interest, even if they are responsible spenders.
• "There are investors who won't buy Illinois or bonds with Illinois labels at any price. They just see it as toxic," said Brian Battle, director at Performance Trust Capital Partners, a Chicago-based investment firm. That means the state pays "the biggest penalty by a long, long shot."
• Battle compared the Illinois situation to someone who has a good job and plenty of revenue. But "we just spend like crazy, don't pay our credit cards and haven't saved for retirement," he said.

(Continued on page 35)