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 November 28, 2008

Plan to Jumpstart Lending Unveiled by Fed and Treasury
The Treasury Dept. along with the Federal Reserve announced on Tuesday, 11/25 their plans to pump hundreds of billions of dollars into the struggling economy. The intention of this cash infusion is to jumpstart lending for mortgages and consumer debt which has been frozen by many of the nation's banks.
The two programs provided by both the New York Fed and the Federal Reserve plan to pump $800 billion in additional funds to help the struggling economy. This amount is more than what was approved by Congress last October which was initially intended to bailout the nation's banks and Wall Street firms. Under this new plan, the Federal Reserve Bank will purchase up to $500 billion in mortgage-backed securities which were originally backed by Freddie Mac, Fannie Mae and Ginnie Mae; the three government-sponsored mortgage finance firms originally created to promote home ownership. An additional $100 billion in direct debts will also be assumed by the Fed.

These recent moves come on the heels of the Commerce Department's recent announcement of the drop in the Gross National product. This broad measure of the nation's economy dropped at an annual rate of 0.5 percent in the third quarter of this year. This is the greatest drop in economic activity in the past seven years. Some economists believe that the nation's economy will continue to contract throughout the fourth quarter and into 2009.