Should the US Federal Reserve help bail out billionaire hedge fund managers and millionaire traders - the very people who bought the risky mortgages that led to the current market panic? That, in essence, is the question swirling around Ben S. Bernanke as he confronts the first crisis of his 18 months as Fed chairman, according to a report on the website of The New York Times.

There are no shortages of opinions, and some are being shouted. Jim Cramer, known for his histrionics on the CNBC financial news channel, angrily called for Bernanke to lower interest rates - something the Fed has resisted doing till now.

A week ago, Cramer charged that the Fed was "asleep" and that the chairman "has no idea how bad it is out there" in the markets.

Lower interest rates would help operators of hedge funds and other money managers because the housing market presumably would strengthen as mortgage rates fell. A revived mortgage market would give the hedge fund operators and other holders of the risky securities a chance to sell them, which they are having trouble doing now in the current nervous market.

Others see a bigger danger for the economy in acting on the pleas of Cramer and others on Wall Street. Cutting interest rates to help the hedge funds would tend to encourage a resurgence of the very risky mortgage lending that has caused the current turmoil, rekindling the crisis.

The issue is often referred to as “moral hazard,” meaning that the risk-takers who brought on this panic would feel bailed out and would be more likely do it again.

Bernanke sees the issue in a more pragmatic way. The Fed’s actions and words suggest that, far from concerning himself with "moral hazard", the Fed chairman is trying to protect, and thus reassure, ordinary investors in stocks and bonds.

By pumping a total of $62 billion on Thursday and Friday into the pool of funds available for lending, the Fed can help enable small investors to continue to trade securities, confident that the checks they receive from their brokers will not bounce. The new liquidity allows the banks to provide credit to the marketplace without driving up interest rates.

The first line of defence for dealing with a liquidity problem is to make sure the system has enough reserves, and the next line of defence, if the market jitters were to persist and threaten a recession, would be to cut interest rates.

The US Fed has kept the federal funds rate steady for more than a year, arguing as recently as this week that the economy is reasonably strong and that cutting interest rates might drive up inflation.

"The predominant policy concern remains the risk that inflation will fail to moderate as expected," the Fed said in a statement after its last policy meeting on Tuesday.

Still, if the panic persists and the economy begins to suffer, Bernanke would presumably be forced to rely on the only other tool the Fed has - a rate cut, the report said.