It’s no longer a case of whether US Federal Reserve will cut interest rates, the only question to be settled at this week’s Fed meeting is how big the cut will be: 0.25% or 0.50%.

Last Friday’s solid November jobs figures now has the market leaning towards a 0.25% cut, but the underlying issue is whether the Fed is more concerned about helping the US economy or Wall Street. A 0.50% cut would be nice Christmas present for those folk who gave us the most serious credit crisis in decades.

This week the quarterly reporting season for investment banks kicks off with Lehman Bros on Thursday, followed by Goldman Sachs. At this stage, JP Morgan Chase, Morgan Stanley and Bear Stearns have yet to confirm dates, while Merrill Lynch and Citigroup report in January.

Citigroup is expected to reveal its new CEO this week and the bank might take the opportunity to flesh out its estimated $US8 billion – $US11 billion in additional write-downs, especially as Standard and Poor’s cut the credit ratings on three of its off balance sheet structured investment vehicles (SIVs) on Friday. Citigroup has around $US60 billion or so in SIVs, more than any other group.

US analysts are expecting another round of write-downs and losses, at most of the banks and brokers, but perhaps not as significant at Lehman or Goldman Sachs. But some of Goldman’s hedge and ‘quant’ funds continue to suffer losses.

Four major US industrial blue chips and exporters, GE, United Technologies, 3M Co and Honeywell will provide updates on their 2008 outlook this week. These will confirm that exports are surging, but will be more pessimistic about the domestic outlook.

There’s also a big meeting between the US and Chinese Governments in Beijing to discuss trade and currency tensions. The US wants China to float its currency more freely, but China is resisting as it battles high inflation and big trade surpluses.

It will be a bit of a diversion from the fading enthusiasm for the Bush-Paulson plan to help subprime mortgage borrowers. More and more sceptics are emerging to question the underlying basis for the proposal.

They are pointing out that the dynamics in the US housing market are such that it is going to continue to fall through 2008 and into 2009 and no amount of help from the government is going to alleviate a lot of the problems.

The US Mortgage Bankers Association said at the weekend that it’s alarmed by the surprising rise in third-quarter delinquencies on prime loans held by the most credit-worthy owners, meaning that the most credit-worthy section of the home loan market might also be under pressure in 2008.

Investment bank Morgan Stanley said the ongoing collapse of junk mortgage paper, combined with a decline in available credit, has plunged the US real-estate industry into “a very different environment on the heels of market events that could force a housing recession like none ever imagined or experienced.”

“History has never seen such extended periods of house-price declines,” it added.

The Centre for Responsible Lending has estimated there could be as many as 1.7 million foreclosures in the US housing market over the next couple of years.