The US Federal Reserve yesterday escalated its efforts to revive the financial system, pledging $800bn to bolster markets for loans to homebuyers, consumers, students and small businesses.
The planned intervention in the consumer lending markets had an immediate impact on interest rates for mortgage-backed securities, which fell to their lowest levels since January after having remained stubbornly high for months despite Fed interest rate cuts.
However, the announcement also underscored the severity of the credit crisis and raised concerns among some analysts that the Fed might be taking on too much risk – and perhaps printing too much money – in response.
'It will take time to work through the difficulties in our markets and our economy, and new challenges will continue to arise,' Hank Paulson, US Treasury secretary said in discussing the measures.
Financial times, The Times, The Independent