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October 20th, 2008

Bernanke Supports a Second Stimulus

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Federal Reserve Chief Ben Bernanke announced today that he supports the idea of a second stimulus package in an effort to reinvigorate our struggling economy. While the head of the central bank has no true authority in constructing a stimulus package, his comments should serve at least as a “heads up” to US lawmakers to begin mulling over the possibility. With the presidential election only weeks away, lawmakers will likely focus on the $250 billion Troubled Asset Relief Program (TARP), shelving the idea until after the election:

Even before the recent intensification of the financial crisis, economic activity had shown considerable signs of weakening. The unemployment rate, at 6.1 percent in September, has risen 1.2 percentage points since January. Incoming data on consumer spending, housing, and business investment have all showed significant slowing over the past few months, and some key determinants of spending have worsened:  Equity and house prices have fallen, foreign economic growth has slowed, and credit conditions have tightened.  One brighter note is that the declines in the prices of oil and other commodities will have favorable implications for the purchasing power of households.  Nonetheless, the pace of economic activity is likely to be below that of its longer-run potential for several quarters.

What was the president’s response?:

“We’ve had an open mind about it,” Dana Perino, President Bush’s press secretary, said aboard Air Force One as the president was flying to Alexandria, La., for a business gathering, “but what we are focused on right now is the urgent need to get this rescue package implemented.”

What do you think? Will a second stimulus package help turn around our hurting economy? How much help did the government’s first stimulus package provide? Leave us a comment, we want to hear what you think!

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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