Financial Support Not Enough to Rescue US Economy: International Economist
Azerbaijan, Baku, 26 September/ Trend , A. Badalova/ Financial support is not enough to rescue US economy, said John Higgins, economist of Capital Economics, British consulting company on economic studies.
"We still don't think buying toxic assets from banks will be a cure-all for the financial sector, given that an ongoing painful adjustment in the real economy is likely to lead to further heavy asset write-offs and that banks will have increasing difficulty in raising fresh capital," Higgins said.
Earlier, Treasury of US worked out measures to stabilize financial market paralyzed by non-liquid mortgage loans. According to draft law, the government intends to buy toxic assets connected with mortgage lending from the financial companies based in US. The anti-crisis plan is estimated at $700bln. The program was also supported by Ben Bernanke, head of Federal Reserve System of US.
"Strains in financial markets reached a new peak as investors waited to see whether Congress would approve an amended version of the US administration's "troubled asset relief program" by the weekend," he said.
Meanwhile, there are disagreements in the Congress over passing of the draft law on supporting financial market. According to the draft law coordinated by the Congress, once it is passed, presidential administration will receive only $350bln at the first stage and $250bln can be added later at the order of Treasury. However, Congress has a right to block allocation of the remaining $350bln.
Presidential candidates Barack Obama and John McCain opposed the support plan. They urged Congress to intervene with the support by administration. Republican candidate McCain said $7000bln worth plan is not promising. Earlier McCain said he would stop his election campaign to focus on the search of ways out of the financial crisis.
The response to financial crisis will be cutting rates by FRS soon. "Fed is likely to stick in the near term o its tack of boosting the availability of credit, rather than cutting its price," he said.
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