WORLD> America
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WORLD> America
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US launches all-out attack on credit crisis
(Agencies)
Updated: 2008-09-20 20:42 EMERGENCY ACTIONS The emergency effort marked the latest dramatic government bid to prevent credit markets from freezing up over huge losses on subprime and other mortgage debt. These have forced US investment bank Lehman Brothers Holdings Inc into bankruptcy, Merrill Lynch into a hasty marriage with Bank of America, the Fed to bail out troubled insurer American International Group, and the government to seize control of mortgage finance giants Fannie Mae and Freddie Mac. "The federal government must implement a programme to remove these illiquid assets that are weighing down our financial institutions and threatening our economy," Paulson said. The Treasury also said on Friday that it would siphon up to US$50 billion from a fund established in the 1930s to conduct foreign exchange market intervention to backstop the rattled US money market mutual fund industry. This long-safe corner of financial markets, home to some US$3.5 trillion of deposits, has increasingly appeared at risk of falling victim to the year-old credit crunch. Money market fund assets dropped by a record US$169.03 billion in the week ended September 17 as jittery investors pulled money out. The Treasury said it would back money market funds whose asset values fall below US$1 a share. Separately, the Fed said it would lend money to banks to finance purchases of certain assets from money market funds. Paulson also said the administration would step up a programme announced this month to directly buy mortgage-backed securities in the market, and said Fannie Mae and Freddie Mac would also increase their buying to try to get credit flowing. "They are absolutely petrified of ... a run on financial assets," said Boris Schlossberg at GFT Forex in New York. |
