Treasury Secretary Tim Geithner attempts to re spark Consumer Credit
Treasury Secretary Tim Geithner is about to unveil a plan that could possibly give consumers more buying power. This new bailout plan could cost more than $2 trillion. Geithner plans to use government money to start purchasing consumer credit card, auto, and student loan asset backed security investments. Geithner has explained that nearly half of all credit that is given to consumers and a small business comes from these asset-backed securities. Since the collapse of the mortgage market the sale of these asset-backed securities has been greatly reduced. Geithner has further said that the sale of asset backed securities has decreased $1.2 trillion between 2006 and 2008. This does not come as a surprise since the mortgage crisis started to unravel in 2006. The collapse of the housing market has affected the American economy in more ways than anyone had ever anticipated.
I recently read an article on the Internet about a city somewhere around the mid-west that has been severely hurt by the credit crisis. Unfortunately this town’s economy survived off of a large company that manufactured camping equipment such pop up tents, campers, etc. This was a family owned company started in the 1960s that thrived for many years. Prior to the credit crisis the company could not keep up with the amount orders coming in. Orders have dropped so much after the credit crisis that company has been forced to lay off 1000 workers. These types of stories are being heard all over the United States. It seems that the financial crisis one way or the other has affected almost everyone.
Tim Geithner’s plan will hopefully increase consumer credit liquidity. Our economy does not function without credit. The mortgage crisis has instilled fear into institutional investors such as pension funds, hedge funds, etc. Investors have been burned by mortgage backed securities and are reluctant to invest in other types securitized financial instruments. Therefore, the credit crisis has significantly impacted almost every sector of the economy. The lack of credit has spurred a massive downturn is sales for the automotive and retail industries. Consumers now have limited access to credit and therefore can not afford to spend money as they once did.
I think that this plan could possibly work. If the Fed is able to unlock consumer credit and increase spending then jobs will start to come back. Consumer asset-backed securities will become attractive to again for investors once jobs are being created again and people are able to pay their debt once again. The bottom line is that the housing crisis has caused investors not too trust the American consumer. Eventually, investors will find confidence in the American people, credit will flow, and our country will prosper once again.
Treasury Secretary Tim Geithner is about to unveil a plan that could possibly give consumers more buying power. This new bailout plan could cost more than $2 trillion. Geithner plans to use government money to start purchasing consumer credit card, auto, and student loan asset backed security investments. Geithner has explained that nearly half of all credit that is given to consumers and a small business comes from these asset-backed securities. Since the collapse of the mortgage market the sale of these asset-backed securities has been greatly reduced. Geithner has further said that the sale of asset backed securities has decreased $1.2 trillion between 2006 and 2008. This does not come as a surprise since the mortgage crisis started to unravel in 2006. The collapse of the housing market has affected the American economy in more ways than anyone had ever anticipated.
I recently read an article on the Internet about a city somewhere around the mid-west that has been severely hurt by the credit crisis. Unfortunately this town’s economy survived off of a large company that manufactured camping equipment such pop up tents, campers, etc. This was a family owned company started in the 1960s that thrived for many years. Prior to the credit crisis the company could not keep up with the amount orders coming in. Orders have dropped so much after the credit crisis that company has been forced to lay off 1000 workers. These types of stories are being heard all over the United States. It seems that the financial crisis one way or the other has affected almost everyone.
Tim Geithner’s plan will hopefully increase consumer credit liquidity. Our economy does not function without credit. The mortgage crisis has instilled fear into institutional investors such as pension funds, hedge funds, etc. Investors have been burned by mortgage backed securities and are reluctant to invest in other types securitized financial instruments. Therefore, the credit crisis has significantly impacted almost every sector of the economy. The lack of credit has spurred a massive downturn is sales for the automotive and retail industries. Consumers now have limited access to credit and therefore can not afford to spend money as they once did.
I think that this plan could possibly work. If the Fed is able to unlock consumer credit and increase spending then jobs will start to come back. Consumer asset-backed securities will become attractive to again for investors once jobs are being created again and people are able to pay their debt once again. The bottom line is that the housing crisis has caused investors not too trust the American consumer. Eventually, investors will find confidence in the American people, credit will flow, and our country will prosper once again.
Labels: consumer credit, consumer spending, Tim Geithner
Credit Card / Financial news blog post by Todd Holliday at 7:46 PM 