Obama and team make plans to unfreeze credit

01.23.09
By Nicholas Storie

The Obama administration has pledged to take decisive action to address the country's economic problems - and they have also made it clear they are aware of the immense difficulty of this task.

Treasury secretary nominee Timothy Geithner told the Senate Finance Committee on Wednesday the government must take large-scale actions "not seen in generations" to restore confidence to the markets.

The hope is that these as-yet-undefined measures will jump-start the credit market, making it easier for people to purchase property, vehicles and other items.

It won't be easy - and it won't be cheap, either. Geithner and Obama adviser Paul Volcker indicated that the total cost of pulling the economy out of its current state could be several trillion dollars.

Geithner said Obama was set to unveil a plan targeted at shoring up banks, dealing with the housing crisis and improving access to credit for consumers, small businesses and students.

Although details of the plan were not revealed, Geithner said it would involve "substantial action" on a "dramatic scale."

So far, the government has found problems within the complex banking system difficult to resolve.

Rising unemployment has led to further defaults on consumer and home loans, which add to banks' losses. Meanwhile, bad debts such as mortgage-backed securities remain on financial institutions' books, eroding investor confidence.

But what benefits can the average person expect from the Obama team's plans?

Fixing the housing crisis is one priority. For example, the House of Representatives recently passed a law stating that between $40 billion and $100 billion in bailout funds should be devoted to preventing foreclosure.

Further information should be available in the next couple of weeks, as the president makes his intentions known.

More Personal Finance Articles | News Home | Discuss in our Forum

Banks are reluctant to lend money