To further assist the US economy defrost from it's current frozen credit state, Treasury Secretary Henry Paulson announced Tuesday an $800 billion budget to be targeted specifically on consumer debt. After many revisions to the original $700 billion bailout plan, the new allotment will focus specifically on consumer issues such as home mortgages to credit card debt.
According to the Federal Reserve, this portion of the largest government bailout in history is being divvied up as follows:
- $100 billion direct obligations purchases from Fannie Mae, Freddie Mac and Federal Home Loan Banks.
- $500 billion purchases of mortgage-backed securities and bundled mortgages (that are usually sold to investors)
- $200 billion in advances to the controller of consumer loan backed securities
This new portion of the economic assistance will work in conjunction with the $20 billion of credit protection allotted from the $700 billion bailout package that was enacted last month. By attacking the debt with economic reserves, this should increase and reestablish the flow of national credit, the availability of home loans to borrowers and should help restore the balance of the real estate market and the overall credit market in general.
Although many people have been saying the economy has been in a "recession" for some time, it has not been by the classic definition. A recession is only official after two concurrent quarters of economic retrenchment. The U.S. economy has yet to show that official marking and all the bailout strategies are being put in place not only to help ward off the downward spiral, but to help get the economy on track after it truly occurs.
