This article is from the source 'bbc' and was first published or seen on . It will not be checked again for changes.

You can find the current article at its original source at http://news.bbc.co.uk/go/rss/-/1/hi/business/7748362.stm

The article has changed 3 times. There is an RSS feed of changes available.

Version 0 Version 1
US Fed unveils new $800bn rescue US Fed announces $800bn stimulus
(30 minutes later)
The Federal Reserve is to pump $800bn (£526.8bn) into the markets in another bid to deal with the financial crisis. The US Federal Reserve is to inject another $800bn (£526.8bn) into its economy in a further effort to stabilise the financial system.
US Treasury Secretary Henry Paulson said the stimulus package aimed to make more lending available to consumers.
The US central bank said it would use $600bn to buy-up mortgage-backed securities to help encourage lending.The US central bank said it would use $600bn to buy-up mortgage-backed securities to help encourage lending.
Separately the Fed also unveiled a $200bn plan to help unfreeze the consumer credit market.Separately the Fed also unveiled a $200bn plan to help unfreeze the consumer credit market.
As the credit crisis has deepened, banks and other financial institutions have been reluctant to lend, deepening the economic slowdown. 'Committed'
Under this new rescue plan - which is in addition to the already-announced $700bn bank bail-out - the Fed is to buy up to $100bn in debt from the troubled mortgage giants Fannie Mae and Freddie Mac. As the credit crisis has worsened, banks and other financial institutions have been reluctant to lend, deepening the economic slowdown.
Key lending such as credit cards, car loans and student loans had essentially come to a halt in October, Mr Paulson said. He added that the new measures were aimed at getting these types of lending back to more normal levels.
"It will take time to work through the difficulties in our market and our economy and new challenges will continue to arise," he said.
"We are committed to using all the tools at our disposal to preserve the strength of our financial institutions and stabilise our financial markets to minimise the spill-over into the rest of the economy."
Economy slows
Under the latest rescue plan - which is in addition to the already-announced $700bn bank bail-out - the Fed is to buy up to $100bn in debt from the troubled mortgage giants Fannie Mae and Freddie Mac.
The central bank said it would also buy another $500bn in mortgage-backed securities - pools of mortgages that are bundled together and sold to investors.The central bank said it would also buy another $500bn in mortgage-backed securities - pools of mortgages that are bundled together and sold to investors.
The Fed said that the $600bn effort to support the mortgage market was being taken to reduce the cost of home mortgages and increase their availability.
It said the purchases of the mortgages and mortgage-backed securities would take place over a number of months.
The announcement - aimed at kick-starting the economy - came as Commerce Department figures showed US economic output shrank between July and September faster than initially predicted.
GDP fell at an annual rate of 0.5% in the third-quarter - from the 0.3% estimated a month ago - as consumers cut spending by the largest amount in 28 years.
New bail-outNew bail-out
The $600bn effort on mortgages came as the Fed also unveiled a separate programme to help unfreeze the consumer debt market. In addition to the $600bn effort on mortgages, the Fed also unveiled a separate programme to help unfreeze the consumer debt market.
The central bank said it would lend up to $200bn to the holders of securities backed by various types of consumer loans, such as credit cards and student loans.The central bank said it would lend up to $200bn to the holders of securities backed by various types of consumer loans, such as credit cards and student loans.
The Fed said that the $600 billion effort to support the mortgage market was being taken to reduce the cost of home mortgages and increase their availability. News of the latest massive financial rescue plan was generally welcomed.
It said the purchases of the mortgages and mortgage-backed securities would take place over a number of months.
The severe financial crisis that is rocking global markets at the moment began more than a year ago with rising defaults on subprime mortgages, loans provided to borrowers with weak credit histories.
'Unblocking credit'
Recently, Treasury secretary Henry Paulson had indicated that the government was working on this new programme, which will be supported by $20bn of credit protection provided by the existing $700bn bank bail-out fund.
The news of this latest massive financial rescue plan was generally welcomed.
"They are getting to the heart of the problem, it's clean, it's quick, it's direct. It's a good way to bring down mortgage rates, because at the end of the day they have to stabilise the housing market," said Todd Abraham of Federated Investors, Pittsburgh."They are getting to the heart of the problem, it's clean, it's quick, it's direct. It's a good way to bring down mortgage rates, because at the end of the day they have to stabilise the housing market," said Todd Abraham of Federated Investors, Pittsburgh.
Robert Macintosh, chief economist with Eaton Vance, Boston, said: "If they can pull it off it'll make some people happy, but I don't know how effective it'll actually be."Robert Macintosh, chief economist with Eaton Vance, Boston, said: "If they can pull it off it'll make some people happy, but I don't know how effective it'll actually be."
Scott Brown, chief economist at Raymond James Associates, Florida, said: "Here is the Fed taking a bunch of debt out of the market, which doesn't hurt. I think it should it should help unblock the credit markets."Scott Brown, chief economist at Raymond James Associates, Florida, said: "Here is the Fed taking a bunch of debt out of the market, which doesn't hurt. I think it should it should help unblock the credit markets."
The severe financial crisis that is rocking global markets at the moment began more than a year ago with rising defaults on sub-prime mortgages, loans provided to borrowers with weak credit histories.