FALLING RETAIL SALES

The worst monthly drop on record for retail sales set off new alarm bells about the U.S. economy Friday, stepping up pressure on policymakers to figure out how to combat what increasingly looks to be a severe recession.

A Commerce Department report showed retail sales fell a record 2.8 percent in October from September. Auto sales led the way, but there were declines in virtually every category.

"All households are panicked and cutting back," said Mark Zandi, the chief economist at Moody's Economy.com.

HOUSING RELIEF

The Federal Deposit Insurance Corp. put forward a proposal that would tap into the $700 billion bailout package and use $24 billion to help households avoid foreclosure. The plan would guarantee 2.2 million modified loans -- mainly risky loans made to borrowers with weak credit or small down payments -- through the end of next year.

Borrowers would get reduced interest rates or longer loan terms, and banks would receive government guarantees that supporters say will make them more willing to modify the loans.

STRUGGLING CITIES

The mayors of three large cities -- Philadelphia, Atlanta and Phoenix -- said the federal government should use a part of the $700 billion to help them meet pension costs, make infrastructure investments and deal with severe cash-flow problems.

"The future prosperity of this country is tied directly to our ability to provide basic services and quality infrastructure to our citizens," Atlanta Mayor Shirley Franklin wrote to Rep. Charles Rangel, the chairman of the House Ways and Means Committee.