US Fed unveils $800 billion bailout plan
The US Federal Reserve launched an $800 billion plan to buy mortgage-related debt and back consumer loans as it tries to revive the US lending market and steer the global economy away from a deep recession.business Updated: Nov 26, 2008 00:50 IST
The US Federal Reserve launched an $800 billion plan on Tuesday to buy mortgage-related debt and back consumer loans as it tries to revive the US lending market and steer the global economy away from a deep recession.
As the Fed announced its move, the US posted the sharpest fall in gross domestic product since 2001. It was down to 0.5 per cent from 0.3 per cent a month ago.
The Fed’s move is intended to strike at the heart of US economic woes, the collapsed housing market. The meltdown in the US market for high-risk mortgages that followed has engulfed the world and caused the worst financial crisis in 80 years, freezing access to credit, sparking bank collapses and requiring the bailout of entire countries.
Under its latest massive life-support intervention, the Fed announced a $600 billion programme to buy mortgage-related debt and securities and a $200 billion facility to support consumer debt securities.
“This action is being taken to reduce the cost and increase the availability of credit for the purchase of houses, which in turn should support housing markets and foster improved financial conditions more generally,” the Fed said in a statement.
The US economy shrank more severely during the third quarter than first estimated as consumers cut spending at the steepest rate in 28 years, according to a Commerce Department report.