It's been almost two years since the Federal Reserve set interest rates to the current near-zero levels. The Fed has kept the target range for the federal funds rate (the interest rate at which banks lend to each other) between zero and 0.25 percent since December 2008 and has, since March 2009, repeated its pledge to keep rates low for an "extended period." That's a signal that it doesn't plan on changing its tune any time soon, experts say.

On top of record-low interest rates, the Fed has also pursued a strategy called quantitative easing, which involves buying up government securities like treasuries to push interest rates even lower in hopes of stimulating more lending to spur economic activity. The first round of quantitative easing started in 2008, and many experts believe the Fed will announce plans to begin another asset-buying program (referred to as QE2) in its next rate announcement in November. Here are four reasons why another round of asset purchases could be problematic:

Savers are hurting. The yield on the 10-year treasury note has hovered around 2.5 percent for most of the latter half of 2010. Historically, rates have been much higher. In mid-2007, when economic growth was much more robust and demand for treasuries was much lower, 10-year treasuries were yielding as much as 5 percent. Many older investors depend on the income they receive from their investments in high-quality bonds like treasuries, and faced with paltry treasury yields, many are considering whether they should take on more risk. "It forces people out the risk spectrum in order to get yield, and a lot of people that are forced out the risk spectrum shouldn't be forced out the risk spectrum," says Liz Ann Sonders, chief investment strategist at Charles Schwab. Rates can only move higher, and when they do, investors that have moved farther down the duration scale (a measure of interest-rate sensitivity) will feel the pain. When interest rates rise, the price of bonds falls--and longer duration bonds will be hit harder than others.

Officials in 50 states and the District of Columbia have launched a joint investigation into allegations that mortgage companies mishandled documents and broke laws in foreclosing on hundreds of thousands of homeowners.

The states' attorneys general and bank regulators will examine whether mortgage company employees made false statements or prepared documents improperly.

Alabama initially did not sign on to the investigation. It reversed course after the joint statement was released.

Attorneys general have taken the lead in responding to a nationwide scandal that's called into question the accuracy and legitimacy of documents that lenders relied on to evict people from the homes. Employees of four large lenders have acknowledged in depositions that they signed off on foreclosure documents without reading them.

The allegations raise the possibility that foreclosure proceedings nationwide could be subject to legal challenge. Some foreclosures could be overturned. More than 2.5 million homes have been lost to foreclosure since the recession started in December 2007, according to RealtyTrac Inc.

The state officials said they intend to use their investigation to fix the problems that surfaced in the mortgage industry.

Investors with failed agribusiness provider Great Southern have launched a class action against Bendigo and Adelaide Bank (BABL), in an attempt to recover losses from the venture.

A statement of claim issued by DC Legal on behalf of investors against BABL, which currently holds the loans, alleges that the Great Southern Group made false and misleading claims in its product disclosure statement (PDS) such as promoting unattainable woodlot yields and failing to report the true position of the managed investment schemes (MISs).

The group also offered investment in the schemes and loans in order to invest up until the month of receivership, according to the statement.

DC Legal solicitor Bruce Dennis encouraged other Grout Southern investors to join the class action.

Since at least 2004, the Great Southern Group was relying on sales from the following year’s MIS sales, which Dennis described as having a ponzi-like character, where new capital is constantly required to prop up previous projects.

Investors were unable to make an informed decision regarding the investments and would not have taken out the loans and invested in the schemes if the true position had been stated, Dennis said. About 260 investors are asking the Federal Court to set aside loans and to be reimbursed for all costs.

“BABL has threatened to commence action against borrowers from GSF having acquired these purported loans. BABL has even threatened the investors with bankruptcy,” Dennis said.

This is the only nationwide class action on the Great Southern matter, Dennis said, although a smaller class action was filed by Macpherson + Kelley lawyers in the Victorian Supreme Court in May this year.

Along with the Great Southern Group, three formers directors have also been named as respondents in the action. They are John Young, Cameron Rhodes and Phillip Butlin. The matter is due to go before the Federal Court on 22 October.

A response from BABL said there was nothing new in the statement of claim, which the bank described as “hopelessly inadequate”.

It covers the same ground as the Macpherson + Kelley action, and BABL has always acted within the letter and spirit of the law relating to loans provided to investors in Great Southern MIS and will vigorously defend the new action, according to BABL managing director Mike Hurst.

Although DC Legal claims to be acting on behalf of up to 2,000 investors, only 230 of its clients have Great Southern loans with BABL, Hurst said.

China has told its biggest banks to increase reserves in a new move to control lending, news reports said Tuesday, as Beijing tries to cool inflation and housing prices without derailing its recovery from the global slump.

There was no government announcement, but Goldman Sachs said its researchers received confirmation of the order from bank employees. Phone calls to the central bank's press section were not answered.

The top six state-owned Chinese lenders were told to increase reserves by 0.5 percentage points to 17.5 percent of their deposits, the Beijing News and other newspapers said, citing unidentified bank employees.

China's rapid growth is easing after hitting 10.3 percent in the second quarter but inflation is creeping up and Beijing is trying to control housing prices that surged earlier amid a credit boom.

The reserve hike "is used as a clear signal to commercial banks that the central bank is willing to take actions to control lending," said Goldman economists Yu Song and Helen Qiao in a report.

Chinese banks were ordered to step up lending in support of Beijing's stimulus, which helped China rebound quickly from the global crisis. But regulators tightened controls early this year after the credit boom fueled a surge in stock and real estate prices, prompting concerns about dangerous price bubbles.

The communist government imposed lending curbs and raised reserve requirements but has avoided a rate hike that it worries might derail China's recovery.

The latest reserve hike would take about 200 billion yuan ($29 billion) out of the pool of money for lending, a relatively small amount, according to Yu and Qiao.

The decision to avoid more severe steps "may also reflect the significant uncertainties facing the economy and disagreements among the views of policy makers," they said.

The reserve hike also might be an attempt to cool a surge in inflows of foreign capital attracted by China's rebound and the strengthening of its yuan against the U.S. dollar, Nomura said in a report.

Coal India Ltd., the world's largest coal company, announced Tuesday a $3.4 billion initial public offering that is India's largest-ever and adds to a growing list of record-breaking IPOs in Asia this year.

Foreign investors fleeing slow growth and low returns in the developed world have rushed into Asia, pumping up stock markets and snapping up shares in new offerings, which can more easily absorb large chunks of capital.

"There's a surge of liquidity created in the western world," said Naresh Kothari, president of Edelweiss Securities in Mumbai. "The belief in the recovery of their economies is not very high. A lot of this liquidity is looking for returns and the best growth is available in Asia and emerging markets."

So far this year, IPOs in Asia, excluding Japan, have totaled $100.5 billion, up from $36.9 billion in the same period last year. It's even topped the $59.1 billion raised in the same period of 2007 when share issues were booming.

According to Dealogic, China had the largest IPO in history in July, with the $22.1 billion offering of the Agricultural Bank of China Ltd. Singapore hit a new record high in October, with the launch of a $2.6 billion IPO for Global Logistic Properties Ltd.

South Korea notched its largest IPO ever in April, with the $4.4 billion offering of Samsung Life Insurance Co. Ltd. and the Philippines broke its record in October with the $537 million Cebu Air share sale.

The Indian government is selling 10 percent of its stake in state-run Coal India Ltd., part of a broad divestment plan to reduce the fiscal deficit and loosen state control over some of the nation's biggest companies. India aims to sell off pieces of state-run companies worth 400 billion rupees ($8.9 billion) this year.