Federal Reserve Rumoured To Help Mortgage Lenders
August 9, 2007
The Federal Reserve are rumoured to be following in the footsteps of the European Central Bank in supporting US mortgage lenders, amidst fresh fears of a global credit crunch.
The Federal Reserve, responsible for US monetary policy, is thought to be considering financial aid for mortgage lenders, many of whom have been driven to bankruptcy over lax lending in the risky sub-prime market.
The sub-prime market, which lends to borrowers with poor credit histories, has been the focus of international scandal and worldwide economic crisis, after it was unveiled that spiralling bad debts and foreclosures had arisen as a result of lending too far beyond salary levels with impractical rates of interest.
The news comes after the European Central Bank today announced the most considerable aid package to the financial market since the terrorist attacks of 9/11 in 2001, where banks and insurance companies were badly hit, and worldwide growth tailed off significantly.
The aid package, totalling over 95 billion euros, will come in the form of a cash injection to avoid liquidity problems, and an impending credit crunch, which many experts fear will plunge us into a global recession.
Fears as to a lack of credit availability and a potential global recession have prompted speculation as to the imminence of the Federal Reserve’s intervention in the struggling US financial markets, particularly after the measures announced by the European Central Bank today.
Without assistance in US financial markets, many mortgage lenders and banks could be facing problems in liquidity terms, making it more difficult for lenders to lend money, and borrowers to obtain the funding they need.
As a result, it is feared that economic growth across the globe will slowdown, possibly leading to a recession, unless finance is readily available for business growth and personal funding.
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