The latest initiative from the Federal Reserve is aimed at the collapse in consumer lending. As our chart shows, the Fed’s promised infusion is roughly equivalent in size to the financing provided by private lenders to this class of borrower in recent years. A key architect of this initiative is Timothy Geithner, whom Barack Obama has nominated as Treasury Secretary. Below we provide links to some of Geithner’s recent speeches and testimony.
The drying up of credit markets, first in securitization, then in bank lending, has spilled over into the real economy. As the graph indicates, the absence of credit to finance car purchases has led to a decline in car sales, pushing U.S. automakers to the brink of bankruptcy. Given Wall Street’s rescue, some suggest that it is only fair to bail out the auto industry. However, critics claim that this use of taxpayer funds would only delay adjustment.
G20 leaders are meeting in Washington to discuss a possible overhaul of global finance. One topic on the agenda is whether to increase the resources of the IMF, which stood at $201 billion at the end of August. However, many underrepresented emerging market countries, such as China, would be wary of such a move without a shift in the power structure. The following articles tackle the agenda of the upcoming G20 meeting.
In a move intended to counter slowing economic growth, China announced its largest ever fiscal stimulus plan of four trillion yuan ($586 billion). The two year package, which includes spending on health care, education, and infrastructure projects, was welcomed by economists and investors who hope that China can serve as a locomotive for the world. Should the rest of the world follow suit with large fiscal stimulus plans of their own?
The incoming President faces a series of daunting economic challenges including a global financial crisis, a growing budget deficit, and, as the graph above indicates, a potentially severe recession. The upcoming G20 meeting and the possibility of a second fiscal stimulus may test the President-elect even before he enters office. This package addresses the many economic challenges facing the next Administration.
Copyright 2009 by the Council on Foreign Relations. All Rights Reserved.
