Fed Chairman Ben Bernanke and his colleagues are battling a three-headed economic monster: crises in the housing, credit and financial markets that - taken together - haven't been seen since the 1930s.

      While Bernanke has pledged to do all he can to provide relief, President Barack Obama and Congress are racing ahead to enact an $825 billion package of increased government spending and tax cuts to revive the economy.

       Against that backdrop, the Fed is all but certain to hold rates near zero and may offer greater insights into what other steps might be taken to ease the problems. The Federal Open Market Committee - the central bank's main policymaking group - opens a two-day meeting Tuesday to assess economic and financial conditions, review the effectiveness of programs already in place to deal with the trio of crises and examine new relief options going forward.

      At its previous meeting in December, the Fed took the unprecedented action of slashing its key rate from 1 percent to a new, targeted range of between zero and 0.25 percent. Economists predict the Fed will leave rates at that record-low range on Wednesday and probably through the rest of this year in a bid to help brace the economy.

      "Fed policymakers don't want to let up until they are absolutely sure an economic recovery has taken hold," said Bill Cheney, chief economist at John Hancock Financial Services. "Overall, their tone is going to be pretty pessimistic. The economy is still spiraling down and all the negative forces are feeding on each other."

       Economists are divided on whether the Fed might announce some new actions Wednesday to deal with the crises.

      One option being considered is expanding a program aimed at bolstering the availability of consumer loans.

       Under the program, which is expected to start in February, up to $200 billion will be made available to spur auto, student and credit card loans as well as loans to small businesses. To do that, the Fed will buy securities backed by those different types of consumer debt. The Fed also hopes that action will lower rates on those loans.

      "If the program is successful, (it) could be increased in size or expanded in scope to provide financing for additional types of securities, such as commercial mortgage-backed securities, for which the markets are currently distressed," Donald Kohn, the Fed's No. 2 official, told Congress earlier this month.

      Another option is for the Fed to buy longer-term Treasury securities.

      "In determining whether to proceed with such purchases, the committee will focus on their potential to improve conditions in private credit markets, such as mortgage markets," Bernanke said in a Jan. 13 speech in London.

      Since the credit and financial crises erupted in the summer of 2007, the Fed has rolled out one radical program after another.

      It is buying up mounds of companies' short-term debt called commercial paper. It is making cash loans to banks. And at the beginning of this year, it started buying mortgage-backed securities guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae to help bolster the crippled housing market.

      Because of all these programs, the Fed's balance sheet has mushroomed to $2.05 trillion, from just under $900 billion in September. Bernanke recently described this policy approach as "credit easing."

       Even as the Fed wants to use all tools available to battle the crisis, it is mindful that there are dangers: the potential to put ever-more taxpayers' dollars at risk; sow the seeds of inflation in the future; and encourage "moral hazard," where companies feel more comfortable making high-stakes gambles because the government will rescue them.

      "Since we are in uncharted territory, I believe we must proceed with caution," Charles Plosser, president of the Federal Reserve Bank of Philadelphia, said in a speech earlier this month.

       On a separate track, the Treasury Department is overseeing a much-criticized $700 billion financial bailout program that is likely to be retooled by the new administration.

      The recession, now in its second year, is dragging on and could turn out to be the longest since World War II.

      The nation's unemployment rate bolted to a 16-year high of 7.2 percent in December and could hit 10 percent or higher at the end of this year or early next year. A staggering 2.6 million jobs were lost last year, the most since 1945.

       With jobs disappearing, home values tanking, foreclosures soaring and nest eggs shriveling, consumers have sharply cut spending. That's played a big role in causing the economy's backslide. So has the collapse in housing, which has ricocheted through the economy.

       Many economists predict the economy contracted at a pace of 5.4 percent in the final three months of last year. The government releases the gross domestic product report Friday. If they are correct, that would mark the worst performance since a drop of 6.4 percent in the first quarter of 1982, when the country was suffering through a severe recession. The economy is still contracting now - at a pace of around 4 percent, according to some projections.

      Robert Dye, economist at PNC Financial Services, described the economy as in a "free fall."

      Meanwhile, consumer prices have been falling. At first that seems like a blessing for shoppers, but it if spreads to wages and already stricken prices for homes, stocks and other things for a long time, it could wreak more havoc on the economy. The country's last serious bout of "deflation" was in the 1930s. Holding rates at record lows would help fend off any deflation risks.

      All in all, the picture is "really grim," said Michael Feroli, economist at JPMorgan Economics.