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The economic recovery gained traction in late fall as shoppers spent a bit more and factories bumped up production. That assessment Wednesday by the Federal Reserve marked its most upbeat view since the economy tumbled into recession two years ago.

The Fed’s new snapshot of business barometers found that conditions generally have improved since the last report in late October.

Eight of the Fed’s 12 regions surveyed reported some pickup in activity or improved conditions, the Fed said. Those regions were: Boston, New York, Chicago, St. Louis, Minneapolis, Kansas City, Dallas and San Francisco payday loans. The new report adds to evidence that the economy is rebounding after the worst recession since the 1930s.

The main challenge for Fed Chairman Ben Bernanke, who will be on Capitol Hill today seeking a second term, is to sustain the fledgling rebound, especially after benefits of government support fade next year. To that end, the Fed is expected to hold a key bank lending rate at a record low near zero when its meets on Dec. 15-16.

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In a surprise move, General Motors chief executive Fritz Henderson resigned Tuesday, giving the battered government-owned automaker its third boss in less than a year.

The move was announced by GM Chairman Ed Whitacre following what he described as a "hectic" meeting of the company’s board of directors, which had been put in place with government oversight after the company’s trip through bankruptcy earlier this year.

Whitacre said he will take over as CEO of the nation’s largest automaker until a replacement is found, and that a search for a new president and CEO would start immediately.

The Treasury Department, which owns 61% of GM stock, was informed of the move but not consulted in advance, according to GM spokesman Chris Preuss.

An administration official said the decision "was made by the board of directors alone" and that the administration was not involved in the decision.

Henderson, 51, a career GM employee, took over as CEO after Rick Wagoner was forced out in March by the Obama administration as part of GM’s government-supervised restructuring.

Whitacre did not answer any questions about the change or the reasons behind them.

"While momentum has been building over the past several months, all involved agree that changes needed to be made," he said.

At the time of his appointment as CEO, many analysts questioned whether Henderson, who has worked at GM for 25 years since graduating from business school, was the right executive to change GM’s insular culture.

Others have said, however, that bringing in an outsider would have been risky given the size and scope of GM and the complexity of its problems.

Steven Rattner, the former head of a Treasury task force that led the government takeover, wrote in Fortune in October that Henderson was originally offered the title of interim CEO but asked not to have the "interim" attached to his title because he didn’t want his authority undercut.

For his part, Henderson had pointed out that the board could fire him at any time.

Whitacre said Tuesday that he and the board are convinced that GM is moving in the right direction.

But GM recently reported a loss of $1.2 billion since its emergence from bankruptcy on July 10 through Sept. 30. Meanwhile, rivals Toyota Motor (TM) and Ford Motor (F, Fortune 500) reported surprise profits in the period due to the spike in sales from the Cash for Clunkers program.

GM also suffered setbacks in its reorganization effort.

The announced sale of its Saturn brand to the Penske Automotive Group (PAG, Fortune 500) fell through earlier this summer. Last week a Swedish buyer for its Saab brand backed out, citing delays in GM closing the sale.

The failed deals forced GM to announce plans to close Saturn and look for an alternative buyer for Saab. GM said Tuesday that it would weigh various offers for Saab for another month, but that closing it was an option.

GM also has not been able to finalize the sale of its Hummer brand to a Chinese manufacturer on the announced timetable.

Finally, last month GM said that it had decided not to sell a majority stake in its main European brand Opel to a group led by Canadian parts supplier Magna International (MGA). It is now seeking help from European governments to restructure that business to end losses there.

David Cole, chairman of the Center for Automotive Research, a Michigan think tank, said he believes that Henderson and the board were on the same page on the Opel deal. He said he doesn’t believe the Saab deal was big enough to spark a falling out, but that it’s possible it was seen as a sign by the board that Henderson was not able to execute the company’s plans.

"My guess is it is something that materialized very quickly," Cole said. "This is not something that was brewing for some time."

Still others say they saw the writing on the wall.

"This does not come entirely as a shock," commented Edmunds.com Senior Analyst Michelle Krebs. "Ed Whitacre was the government’s choice to lead the company and the Automotive Task Force always appeared lukewarm about the idea of Fritz staying in the top job," she said.

"In recent months, the board and Henderson appeared as if they were not on the same page," added Krebs.

Tom Libby, president of the Society of Automotive Analysts, said he had heard rumors recently that Vice Chairman Bob Lutz would replace Henderson. Libby believes that Lutz is still in the running.

Lutz, 77, is credited with helping to change GM’s slow-moving insular culture and with greatly improving its product lineup in his recent role as global head of product development. Lutz now heads GM’s marketing efforts.

"It’s indisputable that, as a product person, he’s been very successful, but this is a very different situation," Libby said.

Cole said he’d be surprised if GM went with an insider to be the new CEO. The job should be attractive to outside candidates even with wage limits imposed by government ownership.

"With the reorganization, they’ve take a lot of costs out of each vehicle," Cole said. "When industrywide sales start to improve, they should get very profitable very fast."

But industrywide sales have yet to show much improvement. On Tuesday industrywide sales for November came in little changed from the weak sales levels of a year ago for the second straight month.

Henderson announced last month that GM would start to repay its $6.7 billion loan to Treasury and make a $1 billion payment by the end of the year. But the government’s ability to recover most of the $50 billion it sunk into the reorganization of GM will depend on its ability to sell stock to the public at an improved price.

GM, because of the bankruptcy, has not disclosed Henderson’s 2009 pay. Treasury Department records show that the company’s top executive salary this year is $950,000 in cash and total compensation of $5.4 million. 

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Federal Reserve Chairman Ben Bernanke, just days ahead of his confirmation hearing, is warning Congress that actions limiting the central bank’s independence could prove detrimental to the causes of financial reform and economic recovery.

In an op-ed piece to be published in Sunday’s Washington Post, Bernanke criticizes two moves aimed at limiting the Fed — a proposal in the Senate to strip the central bank of its bank regulatory powers and a House Financial Services Committee vote to audit monetary policy deliberations and actions.

"These measures are very much out of step with the global consensus on the appropriate role of central banks, and they would seriously impair the prospects for economic and financial stability in the United States," Bernanke wrote.

Bernanke says the congressional moves are a byproduct of the public frustration over the financial crisis and the government’s response, especially the bailout of large banks. (Fed rage boils on Capitol Hill)

"The government’s actions to avoid financial collapse last fall — as distasteful and unfair as some undoubtedly were — were unfortunately necessary to prevent a global economic catastrophe that could have rivaled the Great Depression in length and severity, with profound consequences for our economy and society," he wrote.

But the Fed chairman says that, while reforms are needed, "we should be seeking to preserve, not degrade, the institution’s ability to foster financial stability and to promote economic recovery without inflation."

Among the ideas he supports is development of a special bankruptcy procedure for firms "whose disorderly failure would threaten the integrity of the financial system — to ensure that ad hoc interventions of the type we were forced to use last fall never happen again."

Bernanke’s column comes ahead of a Senate Banking Committee hearing, scheduled for Thursday, considering his nomination for a second term as Fed chairman. President Obama announced the nomination in August.

The last sentence of his commentary is likely to be the theme he and his supporters will stress during the hearing.

"Now more than ever, America needs a strong, nonpolitical and independent central bank with the tools to promote financial stability and to help steer our economy to recovery without inflation," Bernanke wrote. 

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With sales slow and credit tight, small merchants are scrambling to stock their shelves for the year’s biggest shopping season.

Retailers traditionally borrow money to buy holiday inventory. But credit for small businesses has dried up this year, and with the recession slowing sales, few merchants have cash on hand. The crunch is forcing business owners to find new ways to keep running.

For a handful of New York City retailers in one hard-hit stretch of Brooklyn, a small community lender is playing the role of Santa Claus. Lesia Bates Moss, president of Seedco Financial Services, noticed an ever-increasing number of vacant storefronts along Atlantic Avenue. In response, she hosted a meeting with a dozen area retailers to find out how her organization could help.

One common problem the merchants cited was getting enough credit to buy sufficient holiday inventory. So Seedco Financial, a nonprofit that specializes in financing for underserved communities, launched a streamlined holiday program: Retailers who could provide a marketing plan for spending the money and driving foot traffic would get fast loans.

On Monday, Seedco staffers started delivering checks. A typical loan request is for around $20,000, to be repaid over the next year at interest rates of 6% to 10%.

"It doesn’t take a lot in the way of capital access to help these businesses," Moss said. "We really needed to get money into the hands of these merchants before Black Friday, so they could stock their stores."

Toys and beer glasses: Karen Zebulon, the owner of toy and clothing retailer Gumbo on Atlantic Ave., is one of Seedco Financial’s borrowers.

"Especially this year, because we have had such hard times, we really need a boost," she said. "If I can really strategize and plan and buy the right merchandise, I think it can be a turning point for me."

Zebulon plans to ramp up her inventory of toys, because even in tight times, customers continue to spend on kids. She’s impressed at how quickly Seedco Financial got cash into her hands.

"This was — you could say — a godsend," she said. "It is saving me and saving a lot of other merchants that are receiving the loans." Without the financing, she would have been pulling a string of all-nighters trying to handcraft toys to stock her shelves.

Artez’n Gift and Gallery, which sells products made by local Brooklyn artisans, also got a loan from Seedco. Owner Jessica Furst got her check on Monday and "ran to the bank." She plans to use the cash to stock up on one of her best-selling items: pint glasses with illustrations of Brooklyn landmarks on them. They’re a proven customer lure, drawing in tourists and others who make a special trip to Artez’n for the glasses.

With sales slow this year, Furst wouldn’t have been able to afford to produce the Brooklyn beer glasses without the last-minute loan. "I would have been without them again, which would have been a loss of income for me, and possibly a loss of customer base," she said.

She will also use some of the loan money to fix the high-end printer she uses for her graphic design business. The small loan will make a big difference for Furst: "It will enable me to get back on my feet."

The big challenge for merchants will come over the next month. The National Retail Federation forecasts that this year’s holiday sales will decline 1%, to $437.6 billion.

"The real concern is, can you sell stuff?" said Bill Dunkelberg, chief economist of the National Federation of Independent Businesses. "I am sure inventory accumulation has been cautious. It doesn’t look like it is going to be much better than last year, which was terrible."

Squeezing by: Not every retailer is lucky enough to have a community lending program to turn to.

Clark Kepler’s dad opened Kepler’s Books in 1955. Like so many other independent bookstores, Kepler’s Books is fighting for sales in an industry now dominated by Big Box discount retailers and Internet book sellers. Four years ago, with the shop on the brink of closure, 25 members of the Silicon Valley community voluntarily donated $1 million to save the neighborhood bookstore.

The recession has further ravaged the business, which saw a double-digit sales decline. "We had the most difficult time this last several months with the cash-flow issues," Kepler said. "We managed to get through it, but we were robbing Peter to pay Paul every step of the way."

One way the shop is coping is by churning inventory faster than it typically would. Bookstores can return unsold goods to publishers, and Kepler is shuffling fast to fine-tune his holiday lineup.

"It is a mad scramble much of the time," he said. "We have needed to scrutinize our inventory more and more to be sure that we have books that are selling." A book that languishes is "like money sitting on the shelf that we are not utilizing."

Kepler could use additional financing to give his bookstore more breathing room, but he’s had little luck with the banks. He talked with one lender about a Small Business Administration-backed loan, but pulled out after deciding that the loan available for his shop wouldn’t be big enough to justify all the effort involved in the application process.

Kevin Stein, co-owner of the Montana Fish Company in Bozeman, Mont., is also frustrated with the banks. "We have been to every bank in town," he said. "If we could expand into a bigger facility, we could take on more business, we could hire more people — it is a win-win."

But so far, with no expansion loan yet available, Stein’s seafood and wine market isn’t doing its usual seasonal hiring. "We didn’t lay anyone off, but it was a combination of not rehiring and not hiring for the holiday season," Stein said. To make up for the staffing decrease, Stein and his co-owner have upped their own hours.

"As employees filtered out, we just simply didn’t rehire, which means I spent a lot less time at home," he said.

Like the merchants that borrowed from Seedco Financial, Stein is now looking outside the banking industry for help. He’s trying to get a loan directly from the Small Business Administration, through its disaster lending program. A natural glass explosion one block away from Montana Fish may make the company eligible.

Stein and his business partner, Travis Byerly, have been pulling together mountains of documentation.

"It is a little mind-boggling," Stein said of application process. "But it is a great loan if we can get it. It could be a game changer." 

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