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Archive for July, 2008

U.S. Treasury and Federal Reserve Announce Mortgage Banking Bailout Plans

WASHINGTON (Reuters) – The U.S. Treasury and Federal Reserve on Sunday unveiled sweeping steps to support Fannie Mae and Freddie Mac if needed to bolster confidence in the troubled mortgage financing giants and head off a potential meltdown in global financial markets.

The move by the Fed echoed its emergency action to help rescue investment bank Bear Stearns in March, when it opened the discount window to investment banks for the first time since the Great Depression.

It’s Only a Matter of Time Before China Overtakes U.S. Economic Power

China’s economy will overtake that of the United States by 2035 and be twice its size by midcentury, a study released Tuesday by a US research organization concluded.The report by economist Albert Keidel of the Carnegie Endowment for International Peace said China’s rapid growth is driven by domestic demand more than exports, and will sustain high single-digit growth rates well into the 21st century.

“China’s economic performance clearly is no flash in the pan,” Keidel writes.

“Its growth this decade has averaged more than 10 percent a year and is still going strong in the first half of 2008. Because its success in recent decades has not been export-led but driven by domestic demand, its rapid growth can continue well into the 21st century, unfettered by world market limitation.”

Iraq Seeks Timetable for U.S. Withdrawal

Iraq’s national security adviser says there won’t be a security deal with the U.S. unless it contains dates for the withdrawal of U.S.-led troops. On Monday, the country’s prime minister said he expects the deal to include a timetable for withdrawal.

Fed Plans New Rules to Protect New Homebuyers

WASHINGTON (AP) – In an effort to prevent a repeat of the current mortgage mess, Federal Reserve chairman Ben Bernanke says the Fed next week will issue new rules aimed at protecting future homebuyers from dubious lending practices. Bernanke also says the Fed may give squeezed Wall Street firms more time to tap the central bank’s emergency loan program.

Is This Recession Worse Than Past Recessions?

Rising food and gas prices, falling home values and more job losses are making readers pretty gloomy. So just how bad is the current economic slump compared to other downturns?

There have been five official recessions in past 35 years. The most recent ones were fairly mild. So if you were born after 1965, you haven’t been through a nasty recession as an adult. Yet.

The source of the current downturn is very different — and may be as difficult to manage.

The current slump began with the overstimulation of consumer borrowing by both the Fed and the financial services industry. We’ve all borrowed to buy houses, cars, college educations, home remodeling, vacations, etc.

Now with home prices falling, we no longer have the home equity to borrow against. We have to pay off the bills from all that borrowing before we can spend again.