WEEKLY FINANCIAL REVIEW: New Fed Bailout Plan Lifts Stock Market
Several parts of additional plan rolled out.
Compiled by staff
Published: Nov 25, 2008
More government action to prop up the ailing U.S. economy, along with news of President-Elect Obama's economic team, have helped financial markets bounce back from the brink. But whether the rally can continue much longer depends on how investors view the action.
On top of a rescue package for troubled lender Citigroup over the weekend, the Federal Reserve moved Tuesday to buy up $600 million in troubled mortgages from so-called government service enterprises. The action came after the Treasury previously said it couldn't get the job done with the $700 bailout bill passed by Congress and indicated it would concentrate on recapitalizing banks directly.
The Fed also announced a lending facility to back $200 billion in consumer and small business loans, trying to get funds directly into the hands of those trying to buy autos and other goods.
The announcements came just as the government increased the size of the contraction in third quarter GDP from -.3% to -.5% -- a reminder of the trouble the economy was already in before the stock market's October collapse. Indeed, investors weren't immediately sure just how to respond to today's Fed moves. While the action appeared bold, it also underscored just how bad things are. In addition, actually implementing the plan will take time, just as the crucial Christmas retail season moves into high gear for "black Friday." Most years that's the day retailers move into the black, but this year it could have a whole different meaning.
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