(5) - What did the FED do?

In order to stabilize the market and prevent the shadow of the crisis from spreading, Federal Reserve System (FED) immediately pumped lots of money into the banking and credit systems. They would have been even committed to supply more funds if needed. However, despite hundreds of billions of dollars provided, the thirst for funds from banks and credit institutions still could not be quenched. Until March in 2008, there were more than 300 billion dollars injected into the system but still many financial institutions (banks and credit companies) were queuing up for loans. (Robin Blackburn, 2008). The financial systems still suffered from the shortage of capital. 

Another plan was also proposed simultaneously in order to support the housing market which was still on ice (freezing) and also to tighten lending standards. Specifically, mortgage borrowers needed to meet requirements as follows: (1) credit risk might be acceptable; (2) loan contracts were made between a period of time from 1/1/2005 to 31/7/2007; (3) those borrowers needed to prove themselves that they were living in their own houses and in cases of high level loan interest rates adjusted the fixed rate would have been applied instead for 5 years. (Bill Hampel, Mike Schenk, and Steve Rick, 2008). 

FED with the U.S. Congress were also involving in alternative supporting measures such as refinancing or guaranteed mortgage loan programs. 

Though the U.S. government and FED as well had attempted to make positive moves, in circumstances of oil price escalation (new consecutive records), severe dollar devaluation there would be still more concerned that global financial market could get further worse.      




PS: Through my research, I tried very hard to bring you the best view of the credit crunch occurred in America. Because of time and knowledge restrictions imposed on my work, I find it hard to avoid facing problems. In the near future, I will continue investigate more this field...& if you leave on my blog your own comments I am definitely very happy. 


                                                                                   
                                                                                  
                                                                                   Thanks.