--~--~---------~--~----~------------~-------~--~----~
You received this message because you are subscribed to the Google Groups "QuickNews Breaking News Now" group.
To post to this group, send email to quicknewsalerts@googlegroups.com
To unsubscribe from this group, send email to quicknewsalerts+unsubscribe@googlegroups.com
For more options, visit this group at http://groups.google.com/group/quicknewsalerts?hl=en
-~----------~----~----~----~------~----~------~--~---
By David Lightman
McClatchy Newspapers
(MCT)
WASHINGTON _ Treasury Secretary Henry Paulson, warning that "millions of Americans cannot find affordable financing for basic credit needs," announced a major expansion of the federal bailout on Tuesday _ as much as $800 billion to make mortgages and consumer credit more available and affordable.
The government will buy up to $600 billion in mortgage-backed assets, and, in a separate action, lend up to $200 billion to investors who have bought securities backed by consumer loans such as credit cards, auto and student loans, in a bid to free up consumer credit.
Paulson, speaking at a Washington news conference, hailed the housing aid as "a very strong statement of support for the housing market. ... Mortgage spreads have ... not come down as much as they might, but I would say mortgage financing has remained ... available and it has not risen nearly as fast as the cost of other credit."
The latest expansion of the federal bailout came as new data underscored how shaky the U.S. economy is.
The Standard & Poor's/Case-Shiller national home price sales index dropped 16.6 percent in the third quarter. The Gross Domestic Product, the value of the nation's goods and services, shrank 0.5 percent from July through September, the Commerce Department reported Tuesday, revising its initial 0.3 percent shrinkage estimate downward.
Under the plan announced Tuesday, the Federal Reserve plans to buy up to $100 billion in direct obligations from mortgage finance giants Fannie Mae and Freddie Mac and the Federal Home Loan Banks.
It also will purchase another $500 billion in mortgage-backed securities, which consist of mortgage loans that are packaged together and sold to investors. These securities, viewed as toxic now because so many mortgages are going unpaid, are at the heart of what's weighing down troubled banks. Purchasing them is intended to free up bank lending, which would spur the economy.
In addition, Paulson said Treasury will provide $20 billion of credit protection to the Fed from last month's $700 billion financial rescue package. The protection will be part of a new Fed program that could lend as much as $200 billion to investors in securities backed by credit card, auto and other loans.
Paulson noted that "credit market stresses led to a steep decline in the third quarter of 2008, and the market essentially came to a halt in October."
Compounding the problem, he said, was that "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."
The new fund aimed at freeing up credit, Paulson said, "will enable a broad range of institutions to step up their lending, enabling borrowers to have access to lower cost consumer financing and small business loans."
Paulson said he worked closely on Tuesday's plans with Treasury Secretary-designate Timothy Geithner, currently president of the New York Federal Reserve Bank. President-elect Barack Obama nominated Geithner to the post on Monday.
Paulson called Geithner "very well positioned" to oversee the economic relief effort, "because he understands everything we have in place today, and participated very actively in helping put it in place."
Paulson also issued a plea for patience: "The fact is, we now have the tools and the capacity to stabilize the system and work to get credit flowing again _ and it will take awhile to do that."
___
© 2008, McClatchy-Tribune Information Services.
Visit the McClatchy Washington Bureau on the World Wide Web at www.mcclatchydc.com.
