Globonomics!

Consulting|Technology|International business

Fed tries to come up with a solution

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In what is termed as the worst crisis to hit the financial landscape of Corporate America since the 1930’s and the great depression, the Fed made an emergency attempt to get the Congress to agree to a $ 700 billion rescue plan aimed to stem the current financial turmoil by purchasing the bad assets from financial companies at a deep discount and sell it at a later date when things are more bright. This will help take the bad assets off from the financial companies’ balance sheets helping ease the stress and load on the financial system.

I saw an address by President Bush to the public flanked on his two sides by Treasury secretary Paulson and Ben Bernanke  – Chairman of the Federal reserve asking for tax payer money to be given to resolve this crisis.

The risks of not acting outweigh the current risk of helping take the bad assets off the balance sheets of those struggling companies through this mechanism – is what most top policy makers felt.

ex: if AIG was allowed to go down under, there was a risk to the entire global financial system and economies would have ground to a halt. Such is the far reaching chilling outcome of the credit crunch crisis.

Its to be seen how this rescue package pans out in reality in coming weeks.

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