President Bush Joins Bernanke In Plans To Ease Economy

The continued housing problems in the US economy could be over, if new measures promised by President Bush and the Federal Reserve announced today come to fruition.

At a speech today, President George W Bush unveiled a combination of different measures to assist homeowner finding themselves in repayment difficulties, after rising foreclosures have lead to liquidity problems at many major lenders.

The moves include changes in taxation laws that would enable borrowers to rearrange their repayment plans with lenders, whilst taking the same line as the Federal Reserve in saying they were not responsible for ‘bailing out speculators’.

The sub-prime mortgage sector has been the worst hit in recent years, after successive interest rate rises have exposed sub-standard lending practices. As a result, lenders across the nation are facing a dramatic shortage of liquidity, leading to a so-called ‘credit crunch’.

Meanwhile, Chairman of the Federal Reserve Ben Bernanke led analysts to believe that interest rates would be cut at the next meeting of the Federal Reserve to “promote general financial stability’.

With interest rates being cut further, the Federal Reserve can make repayments on risky sub-prime mortgages less expensive, whilst helping banks borrow money at a more affordable rate to ease liquidity pressures.

Having already invested billions of dollars in emergency funds into the banking system over the last month, the Federal Reserve has been praised by analysts as working well to help the sub-prime crisis and the fallout for major mortgage lenders.

The news buoyed markets today, that had until now been plagued by uncertainty and volatility over the future of the world economy. However, after the announcements of today, trade on major world exchanges rebounded to reflect a positive impact on investor confidence.

Whilst the moves have been seen as yet another temporary measure, the outlook for the sub-prime market looks undoubtedly better than it did just a day ago.

Story link: President Bush Joins Bernanke In Plans To Ease Economy