Feds To Use $800B To Bolster Lenders

Paulson Unveils Programs Aimed At Unfreezing Credit Markets, Buying Mortgage-Backed Assets

(CBS/AP)  The government has introduced a pair of new programs that will provide $800 billion to help unfreeze the market for consumer debt which Treasury Secretary Henry Paulson calls vital to supporting the economy.

The Federal Reserve says it will buy up to $600 billion in mortgage-backed assets in another attempt to deal with the financial crisis.

The Fed says it will purchase up to $100 billion in direct obligations from mortgage giants Fannie Mae and Freddie Mac as well as the Federal Home Loan Banks. It also will purchase another $500 billion in mortgage-backed securities - pools of mortgages that are bundled together and sold to investors.

The government also announced it is readying a program to aid companies that issue credit cards, make student loans and finance car purchases.

Paulson says key markets for consumer debt essentially came to a halt in October.

"As a result, millions of Americans cannot find affordable financing for their basic credit needs," Paulson said. "Credit card rates are climbing, making it more expensive for families to finance everyday purchases. This lack of affordable consumer credit undermines consumer spending and as a result weakens our economy.

"Remember that $200 billion is a starting point," Paulson said. "It's going to take a while to get this program up and going and then it can be expanded and increased over time."

The government, while looking to reduce fear in the credit markets, is eager to see lenders resume more normal levels of lending to help stimulate the economy. Since September, when credit markets first froze, financial institutions have been hesitant to hand over money for fear they won't be repaid. That, in turn, has made it harder for businesses and consumers to borrow.

CBS News correspondent Claire Leka reports it's a change of direction for the Treasury Department, which initially planned to use the $700 billion bailout package to buy distressed assets from banks, but then later decided to concentrate on pumping money directly into banks and other financial institutions.

"The economy is suffering greatly because consumer spending makes up more than two-thirds of the economy," Leka said. "If consumers can't spend money, the economy is grinding to a big halt, and they want to change that."

"It's not clear if it's enough," Tourno College economist Peter Sperling told CBS News. "We'll just have to wait and see what it does in freeing up credit. But it's presumably in the right direction, and it's acting on the right types of loans."

And it was news Wall Street wanted to hear, extended its advance to a third day. In early trading, the Dow Jones industrial average rose 112.06, or 1.33 percent, to 8,555.45. The blue chip index rose 891 points on Friday and Monday.

The government's decision overshadowed a report that the nation's gross domestic product declined in line with expectations.

Since the financial meltdown accelerated in September, credit card issuers have been tightening their standards.

A survey released Nov. 3 by the Federal Reserve found that a sizable percentages of banks had "continued to tighten their lending standards and terms on all major loan categories over the previous three months."

Nearly 60 percent of banks responding to the survey said they had tightened lending standards on credit card debt.

And the credit pinch is being felt outside the U.S.: According to the British Banker's Association, the number of new home mortgages approved in the U.K. was 52 percent lower in October than in October 2007.

The Fed said that the $600 billion effort to support the mortgage market was being taken to reduce the cost of home mortgages and increase their availability. It said the purchases of the mortgages and mortgage-backed securities would take place over a number of months.

The severe financial crisis that is rocking global markets at the moment began more than a year ago with rising defaults on subprime mortgages, loans provided to borrowers with weak credit histories.

The billions of dollars of losses financial institutions have suffered on their mortgage loans have caused banks to stop making new loans of various types, which almost certainly has helped push the country into a deep recession.

But while these moves are intended to stabilize banks and thaw the frozen flow of credit, USC business professor Lawrence Harris told CBS News correspondent Larry Miller, "There's simply no sense extending credit to people if they can’t pay off the credit they already have."

[doctxt]

EQUATION OF THE DAY:
FED LENDS OUR $ TO BANKS FOR 1% (PLUS) WE BORROW FROM BANKS @ 10 TO 20% (PLUS) 8% TAXES (EQUALS) WE FOREVER LOSE (PLUS) FED & BANKS WIN (MINUS) TRUTH (EQUALS) DEPRESSION (TIMES) MORE LIES (EQUALS) POLITICIANS (PLUS) INVESTORS (DIVIDED BY) GREED (MINUS) LAW (MINUS) GOD (EQUALS) REVOLUTION!!!

EQUATION EXPLAINED:
10 YEARS AGO PEOPLE HAD TO CHOOSE-MORTGAGE PAYMENTS OR GAS FOR CARS. THEY CHOSE GAS-MORTGAGE INDUSRTY CRUMBLED-FED SAYS FAULTY PAPER AGREEMENT BETWEEN BANKS AND INVESTORS CAUSED IT-HIGHLY PAID FEDERAL ECONOMIC GURUS LOOKED THE OTHER WAY-OIL COMPANIES REAPED $60 TO $80 MILLION A YEAR (TIMES) 10 YEARS = $800 MILLION (ONE COMPANY ALONE)-%u201CFAILOUT PLAN%u201D IS NOT ENOUGH%u2026 FORESIGHT IS AS GOOD AS HINDSIGHT-HAVE CONFIDENCE, THE PEOPLE WILL PAY FOR IT.

FAILOUT PLAN WAS TO BAIL OUT ILLEGAL IMMIGRANTS WHO BOUGHT AMERICAN SOIL VIA FANNIE AND FREDDIE-THEY GOT BAILED OUT FIRST-PLAN NOT WORKING FOR ANYONE ELSE. AFTER GOV%u2019T APPROVAL & MAE, MAC BAILOUT - GURUS CHANGE- WANT TO INVEST IN BANKS & INDUSTRY INSTEAD OF HELPING PEOPLE.

ABORTION IS OK-BILL IS ON FUTURE GENERATIONS THAT WILL BE KILLED, AND THEY ROB THE RETIREMENT EGGS OF US ALL.

THIS IS WHY WE HAVE AN ELECTORAL REVOLUTION-PEOPLE WANT CHANGE-WILL IT COME FROM POLITICIANS WHO ADMITTEDLY CREATED IT?

FREE MARKET ECONOMY-PRIVATIZE GAINS-SOCALIZE LOSSES!!!

NO NEW REGULATIONS!-THROW MONEY AT IT!-BANKRUPT AMERICA-MAKE WAY FOR THE AMERO!!!

THIS IS A BALANCED BUDGET-FOR THE GREEDY!

[doctxt]

The value of any home in the US is based on the needs of the city or town where it is. Ask any Tax Assessor.

Real Estate value is not created or manipulated by any other means.

Bailout? Why? The "Real "Estate" is still there. The only ones getting bailed out are those responsible for this whole mess.

The purpose for the bailout to keep "property value" %u201CInflatedly%u201D high. If the housing market corrected itself now, city and town governments wound find themselves in shutdown mode.

[serf_1]

I wish I had the power to create 800 billion of funny money at my fingertips like the Fed. The more we print the harder the crash will be. Perpetual growth is unsustainable, and taking on more debt to get out of debt is ridiculous. This country is going to go tango uniform like the U.S.S.R. did. It''s only a matter of time now.

[jfshao]

Why keep on bail out banks?

Directly give away few percentage to buyers as downpayment toward buying a house or a cars. say, 3% on a house and 10% on a car for the next 12 months. Sells would go skyrocket for a year and the price tag would be under 100B.

[cbsblogger]

Let me summarize this gig that Bush, Bernanke and Paulson and the Wall St. bankers have foisted upon us.....

We taxpayers are required to give the same incompetent Wall St. financier crowd that created this fiasco a $7 trillion IOU from we the people that will be held by China so that the same greedy bankers can then lend us taxpayers our borrowed money back at double digit usury rates of interest.

[boehlow1754]

read: Oswald Spengler; the decline of the West.
T.S Eliot; The waste Land!

[boehlow1754]

Whoever fights monsters should see to it that in the process he does not become a monster. And when you look long into an abyss,the abyss also looks into you.

Fredrick Nietzsche
(Beyond good & evil)

It seems to me that we''ve been drunk on credit (especially credit cards) for about 3 decades now, and it''s given us a big hangover and headache. Now the government wants to "free up" even more of what we got drunk on in the first place??
Doesn''t make any sense to me...

[humanavance]

"A 700 billion bailout voted by Congress has somehow turned into a 7 Trillion dollar bailout from both Treasury and the Feds, all going to Wall Street, and all to the same individuals who caused it all."
cbsblogger


And all with both Bush and Obama''s support.

Do you think there''s a nutshell big enough to fit them both in?
ST

"And let history record that in that darkest hour, when loss predeemed history, providence again praised freedom. Providence, and the righteous will and might of the American people."
SearingTruth, A Future of the Brave

A Future of the Brave

[cbsblogger]

A 700 billion bailout voted by Congress has somehow turned into a 7 Trillion dollar bailout from both Treasury and the Feds, all going to Wall Street, and all to the same individuals who caused it all.

[cbsblogger]

"Fellow Citizens,

Until prices are brought into line with wages we will have no economic recovery.

This means that a falsely valued $750,000.00 home will have to be brought down to its real value, $75,000.00.

And all the governments of the world pouring all the cash taxpayers of the world have left into an effort to sustain false prices will fail.

That''''s why socialism, communism, and fascism have always failed.

Because their economic, as well as humanitarian, models do.

And there is no better recipe for disaster than corporate capitalism on the way up, accompanied by corporate socialism on the way down."
SearingTruth, September 2008

A Future of the Brave

Posted by Humanavance at 10:19 PM : Nov 25, 2008
======================================
Corporate Capitalism? The only economic system the USA has had for the last 35 years has been an acceleration of corporate cronyism (not capitalism) on the way up.

On the way down we''ve socialized the losses and attempted to privatize all the remaining gains. There is no capitalism in the USA.

[steamed2]

Well, another week, another ''massive bailout'' gets unveiled. Even the dollar amounts are starting to lose their shock value. Our great-great grandchildren will still be paying on this when the Chinese come to foreclose on them. Paulson spent the first trillion any ol'' way he pleased and saved his favorite companies like Citigroup, A.I.G., and his own Goldman Sachs with taxpayer money. Now it sounds like he''s concluded he can''t get his hands on any more cash unless he actually makes an effort to spend some on ''main street''. Gosh *** it, those pesky citizens are always getting in the way! Congress is apparently staffed by the galactically stupid! Take a minute and check out http://www.peak.org/~LW584

[swingset4u]

I say if these corporations want a bailout then the CEO''s MUST take a wage cut to $15.00 an hour, no benefits for your family (i.e. HEALTH) and NO BONUSES!!! If you hold stock in these companies then you are S.O.L. It''s called investment and with investment comes RISK!

[humanavance]

"We became evil to fight evil, assuring its victory."
SearingTruth

A Future of the Brave

[swingset4u]

CONVICT BUSH!

[swingset4u]

Funny how all of this does not benefit me! I don''t see lower food prices and prices of consumer goods. Gas prices have fallen because people choose to put food on the table than let it sit in their tank. Catch 22 if you ask me.

[swingset4u]

sub prime mortgage melt down caused by carter then Clinton(jowand)
that sounds like something a guy i know who has a public teaching job might say!

Posted by boehlow1754

Oh come now! We all know it was the BUSH''S who started this rollercoaster heading down hill to hell!

[swingset4u]

Feds To Use $800B To Bolster Lenders

As long as you have a credit score of 700 or better.

[humanavance]

"Remember democracy never lasts long. It soon wastes, exhausts, and murders itself. There never was a democracy yet that did not commit suicide."
John Adams, letter to John Taylor, April 15, 1814

"And so together we shared the fate of all the failed democracies before us, joining those pitiful beings who had held the light of freedom in one hand, and put it out with the other."
SearingTruth

A Future of the Brave

[humanavance]

"Fellow Citizens,

Until prices are brought into line with wages we will have no economic recovery.

This means that a falsely valued $750,000.00 home will have to be brought down to its real value, $75,000.00.

And all the governments of the world pouring all the cash taxpayers of the world have left into an effort to sustain false prices will fail.

That''s why socialism, communism, and fascism have always failed.

Because their economic, as well as humanitarian, models do.

And there is no better recipe for disaster than corporate capitalism on the way up, accompanied by corporate socialism on the way down."
SearingTruth, September 2008

A Future of the Brave