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President-elect Barack Obama on Monday called the financial crisis one of “historic proportions” and said that he and the Bush administration are “united” in their efforts to get the economy back on track.
As Obama unveiled his economic team, he said there isn’t “a minute to waste” when it comes to rebuilding the economy.
“My commitment is to do what is required. President Bush has indicated that he has the same approach, the same attitude,” Obama said at a news conference in Chicago, Illinois.
Obama’s remarks came just hours after the federal government announced a massive rescue package for Citigroup — which President Bush said he’d spoken about with Obama before it was announced.
Obama said Monday that he has asked his newly formed economic team to develop recommendations for his economic plan, which he outlined Saturday, and to consult with Congress, the current administration and the Federal Reserve on immediate economic developments over the next two months.
In selecting his economic team, Obama said he sought leaders who share his fundamental belief that “we cannot have a thriving Wall Street without a thriving Main Street.”
Watch Obama call the economic crisis one of ‘historic proportions »
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NEW YORK (CNNMoney.com) — The Federal Reserve announced a new program to help the battered market for short-term business loans - taking its closest step yet to lending directly to businesses.
The program addresses commercial paper, a form of short-term funding that is crucial to many businesses operations.
Commercial paper is sold by major corporations and most of the nation’s leading financial institutions. They use the proceeds to fund day-to-day business operations. It is bought primarily by money market fund managers and other institutional investors.
Before the current credit crisis, there was nearly $2 trillion of commercial paper outstanding and was mostly issued for short terms - never more than nine months - and thus had to be renewed frequently.
For investors, it was considered a very safe investment to purchase and one that could be easily resold to other investors.
In the past month, the amount of money outstanding in commercial paper loans has fallen 11% to a seasonally adjusted $1.6 trillion on Oct. 1 from $1.82 trillion on Sept. 10.
The decline in available funding indicates only part of the market’s problems, however. Investors have also become unwilling to buy longer-term paper - beyond a week or two - from even companies and financial institutions with top-flight credit ratings.
Federal Reserve officials speaking on background to reporters said that the overwhelming majority of the paper outstanding is coming up for renewal in the next several days and companies needing to use the money could face trouble when they try to renew it.
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Wreckage from a massive crisis on Wall Street could prompt the Federal Reserve to do an about face and once again cut a key interest rate this week or possibly later this year, economists said Monday.
Just a few days ago, a rate cut appeared largely off the table. Now it has emerged as a possibility as the Fed prepares to meet Tuesday against a backdrop of historic upheaval in the U.S. financial system.
Lehman Brothers Holdings Inc., the country’s fourth-largest investment firm, filed for bankruptcy protection on Monday. And, Bank of America is buying Merrill Lynch in a $50 billion deal.
“It puts a Fed rate cut back on the table,” said Stuart Hoffman, chief economist at PNC Financial Services Group.
Seeking to calm frazzled markets, President Bush assured the country his administration is “working to reduce disruptions and minimize the impact of these developments on the broader economy.”
More at MSN
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Image via Wikipedia The fate of the world financial system hangs from a thread today after the New York office of the Federal Reserve stood up to the big Wall Street financial houses on Sunday and essentially told them, “thanks but no thanks” on their request for a bridge loan to nowhere.
It’s about time. For years, the country’s major broker-dealers and banks have competed with each other to become the No. 1 underwriter of loans, bonds, mergers, mortgages, swaps and equities. The industry’s compensation system is focused on rewarding managers who took big risks, and could bring home top rankings in dealmaker lists.
All the while, banks figured that if they really got into trouble, the federal government would back them up with taxpayer funds. And the government reluctantly complied twice this year, backing up the reckless behavior of high-flying bankers at Bear Stearns in March, and Fannie Mae and Freddie Mac last week with loan guarantees costing untold billions.
But when Lehman Brothers chief Richard Fuld came to the Fed with his hand out on Friday, the central bankers had finally had enough – and told the banking industry that it needed to come up with its own solution to its problems. In meetings over the weekend in New York that must have frozen the veins of bankers used to bullying the government into doing their bidding, the government left Lehman Brothers and all its creditors out to dry, figuring it was better to let the financial system burn to the ground than to risk any more of the Federal Reserve’s withering balance sheet.
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