Over 1 million pilgrims benefit from golf cart service at Grand Mosque during Ramadan    Visitors welcomed with Eid initiative at Thee Ain Heritage Village in Al-Baha    Tebuk emir reviews rain response in Tayma    Saudi Arabia considers rent cap as part of major real estate reforms    Messi's bodyguard banned from touchline at Inter Miami games    Screen time in bed linked to insomnia, study finds    Le Pen vows to appeal political ban, calls verdict a 'denial of democracy'    Death toll from Myanmar earthquake rises to 2,719 as rescue efforts continue    Russia, Ukraine trade blame over new energy strikes    Putin orders Russia's largest military call-up in over a decade    Albania hosts MWL chief for Eid sermon at largest mosque in the Balkans    Haramain High-Speed Railway transports over 1.2 million passengers during Ramadan    Saudi Transport Authority says passengers can ride for free if taxi meters are off    Ministry of Education forms 425 community partnerships with SR653 million impact    Mexico bans junk food in schools to fight childhood obesity epidemic    Sweet sales surge ahead of Eid as Saudi chocolate imports top 123 million kg in 2024    Saudi creatives shine at Jeddah's Fawanees Nights with art, fashion, and storytelling    T1 CEO confirms Gumayusi's return for LCK Spring after lineup shakeup    100 Thieves claim Marvel Rivals Invitational NA crown as 2025 scene heats up    Bollywood actress vindicated over boyfriend's death after media hounding    Saudi Arabia hold Japan to goalless draw in Saitama to stay in World Cup hunt    Grand Mufti rules against posting prayers and preaching in mosques on social media    King Salman prays for peace and stability for Palestinians in Ramadan message King reaffirms Saudi Arabia's commitment to serving the Two Holy Mosques and pilgrims    Bollywood star Saif Ali Khan 'out of danger' after attack at home in Mumbai    Exotic Taif Roses Simulation Performed at Taif Rose Festival    Asian shares mixed Tuesday    Weather Forecast for Tuesday    Saudi Tourism Authority Participates in Arabian Travel Market Exhibition in Dubai    Minister of Industry Announces 50 Investment Opportunities Worth over SAR 96 Billion in Machinery, Equipment Sector    HRH Crown Prince Offers Condolences to Crown Prince of Kuwait on Death of Sheikh Fawaz Salman Abdullah Al-Ali Al-Malek Al-Sabah    HRH Crown Prince Congratulates Santiago Peña on Winning Presidential Election in Paraguay    SDAIA Launches 1st Phase of 'Elevate Program' to Train 1,000 Women on Data, AI    41 Saudi Citizens and 171 Others from Brotherly and Friendly Countries Arrive in Saudi Arabia from Sudan    Saudi Arabia Hosts 1st Meeting of Arab Authorities Controlling Medicines    General Directorate of Narcotics Control Foils Attempt to Smuggle over 5 Million Amphetamine Pills    NAVI Javelins Crowned as Champions of Women's Counter-Strike: Global Offensive (CS:GO) Competitions    Saudi Karate Team Wins Four Medals in World Youth League Championship    Third Edition of FIFA Forward Program Kicks off in Riyadh    Evacuated from Sudan, 187 Nationals from Several Countries Arrive in Jeddah    SPA Documents Thajjud Prayer at Prophet's Mosque in Madinah    SFDA Recommends to Test Blood Sugar at Home Two or Three Hours after Meals    SFDA Offers Various Recommendations for Safe Food Frying    SFDA Provides Five Tips for Using Home Blood Pressure Monitor    SFDA: Instant Soup Contains Large Amounts of Salt    Mawani: New shipping service to connect Jubail Commercial Port to 11 global ports    Custodian of the Two Holy Mosques Delivers Speech to Pilgrims, Citizens, Residents and Muslims around the World    Sheikh Al-Issa in Arafah's Sermon: Allaah Blessed You by Making It Easy for You to Carry out This Obligation. Thus, Ensure Following the Guidance of Your Prophet    Custodian of the Two Holy Mosques addresses citizens and all Muslims on the occasion of the Holy month of Ramadan    







Thank you for reporting!
This image will be automatically disabled when it gets reported by several people.



US leaders running out of options to deal with multiple economic crises
Published in The Saudi Gazette on 17 - 07 - 2008

US leaders are running out of answers to America's economic crisis.
The Federal Reserve has no more practical room to push interest rates lower; there is only so much taxpayer money for shoring up housing, and if depositors lose confidence there is little officials can do to stop a run on banks.
President George W. Bush, speaking from a White House podium, and Federal Reserve Chairman Ben Bernanke, in testimony to a congressional committee, sought on Tuesday to soothe jittery markets and reassure Americans that the US financial system remains basically sound despite the current turmoil.
But they both tempered their remarks with warnings and expressions of uncertainty.
Bernanke warned that the US economy faces “numerous difficulties,” that the outlook for inflation is unclear and that “financial markets and institutions remain under considerable stress.” Bush told a news conference: “The president doesn't have a magic wand.” He was answering a question about soaring fuel prices but his remarks seemed to sum up the government's overall predicament.
After years of seeming tame, inflation is again on the rise, led by higher food and fuel costs. But the Fed, which usually fights inflation by boosting interest rates, finds itself unable to use that weapon any more - it already has pushed rates down to 2 percent from 5.25 percent in response to the housing crisis - without threatening to undermine an economy that is either in recession or growing anemically.
With soaring budget deficits, swollen from the costs of wars in Iraq and Afghanistan and increased spending on homeland security, there's only so much taxpayer money for bailing out failing financial institutions.
Stocks are in a bear market, and shares of banks and other financial companies have been pounded.
“I fear that we're sitting on a financial powder keg,” Bernanke was told by Sen. Richard C. Shelby of Alabama, senior Republican on the Banking Committee.
Mortgage giants Fannie Mae and Freddie Mac hold or guarantee about half the home mortgages in the United States. Their stocks have lost about 80 percent of their value over the past year. Over the weekend, the two were thrown a lifeline by the Treasury Department and the Fed.
But if investor jitters prevent them from being able to sell bonds to finance new mortgages, it could have far-reaching economic consequences.
And the risk of runs on banks is still present, although minimized by federal deposit insurance on accounts up to $100,000 and by other federal safeguards.
Regulators seized IndyMac, a large California-based savings and loan bank, on Friday after hundreds of depositors lined up to withdraw funds at branches. The bank reopened Monday under federal control.
Bush counseled calmness. “I happened to witness a bank run in Midland, Texas, one time. I'll never forget the guy standing in the bank lobby saying, your deposits are good.
We got you insured. You don't have to worry about it if you got less than $100,000 in the bank. The problem was, people didn't hear. And there's a ... nervousness. My hope is, is that people take a deep breath and realize that their deposits are protected by our government.” But nearly $1 billion of IndyMac's approximately $19 billion in deposits was uninsured, according to the Federal Deposit Insurance Corp.
The administration unveiled a US rescue plan for Fannie Mae and Freddie Mac, but it has not put a price tag on it.
Treasury Secretary Henry Paulson said the administration did not intend to nationalize the companies and wanted to preserve their shareholder-owned structure. Still, he said a regulatory overhaul was needed.
Congress is also working on legislation that would modernize the Federal Housing Administration and create a new regulator and tighter controls for Fannie Mae and Freddie Mac.
If the government wound up taking over the two companies, it would have to assume more than $5 trillion in mortgage debt that the two companies now either own or back. That would add to a federal debt fast approaching the $10 trillion mark.
Bernanke defended the Fed's decision to help rescue Bear Stearns as well as Fannie and Freddie. If problems aren't contained, they can ripple throughout the economy, hurting everyone, he said. “Financial stability is critical to economic stability.” David Jones, an economist at DMJ Advisors and a longtime Fed watcher, said Bernanke's testimony suggested that the Fed's “emphasis has shifted to financial stability,” perhaps signaling that it will leave interest rates unchanged until late 2008.
There are some things that could be done, but they may not be politically viable.
Democrats in Congress want to pass a second economic stimulus package, but it is being resisted by Bush and many congressional Republicans.
House Speaker Nancy Pelosi has urged Bush to release oil from the government's Strategic Petroleum Reserve to knock down gasoline prices. Bush repeatedly has rejected such calls to use oil from the reserve, which holds about 702 million barrels of oil - enough to replace imports for two months. The crude oil is stored in caverns in Louisiana and Texas. Recently, Bush reluctantly agreed to halt shipments of about 70,000 barrels of oil a day into the reserve after Congress directed him to do so.
In any event, voters don't seem to have much confidence in either Bush or Congress.
The approval rating of Congress is down to a new low of just 18 percent from 23 percent last month, according to a new AP-Ipsos poll. Bush's approval is at 28 percent, about even with the 29 percent rating last month.
Only 16 percent of those surveyed thought the country was moving in the right direction, a new low as well, although statistically the same as last month's 17 percent. – AP __


Clic here to read the story from its source.