Washington Injects Another 800 billion into Lending
The United States capital has accelerated attempts at averting a protracted and deep recession via earmarking another bailout of $800 billion for the fractured credit markets of America. This is in addition to the first $700 billion of taxpayers’ money used to rescue the banks of America.
This newest bailout was announced when the US began to plunge into recession faster than Wall Street anticipated. New data showed that the economy, which is the largest in the world, had shrunk at the fastest rate it had since the 2001 terrorist attacks. Americans have cut spending steeper than ever in the last 28 years, according to the US Commerce Department. Spending fell by 3.7% during the 3rd quarter, instead of 3.1% as estimated, which is the sharpest decline rate since 1980s 2nd quarter. Meanwhile, the house price index of S&P Case Shiller recorded the biggest decline for one month. During September, house prices in America fell 17.4% in comparison to the same period the year prior.
These figures were released while the US Federal Reserve revealed new measures for boosting consumer credit and the mortgage backed securities market. The central bank of the United States said that they created a new vehicle, the Term Asset Backed Securities Loan Facility, which will offer loans to troubled bonds holders amounting to $200 billion, which are backed by small business and consumer loans.
At the same time, the Federal Reserve said that they would start purchasing Government Sponsored Enterprise backed-debt amounting to $600 billion in an attempt to thaw the frozen credit markets. The Federal Reserve’s moves offer the most recent evidence that Washington, corporate America, and Wall Street have been stunned over the economic downturn’s speed.