The Fed's Plan to Revive the Economy

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THE FEDERAL RESERVE -- The Federal Reserve is going to spend more than $1 trillion to help save the economy.

The Fed will pump that money into the credit markets to help lower interest rates.  It is hoped that lower rates will help get the economy growing again and strengthen the housing market.

The pain caused by this recession is very real. President Obama heard about the pain suffered by American families again at a California town hall meeting Wednesday night.

"I can't get work," Duane Weber, an unemployed auto worker told the President. "I've got a family. What do I do?"

Economy Still Frozen

The lack of money and credit is still freezing up the economy.

"They have to get the money out there, so we can all go to work," said Rick Triplett, an unemployed rock plant worker:

Projects like an affordable housing development will die without money coming from somewhere.

"Absent those funds or other sources, the bank will be filing notices of default on those projects," explained Jonathan Klein, Union Bank vice-president.

"Credit is essential to economic recovery," said Treasury Secretary Tim Geithner.

The Fed's Move

Now the Federal Reserve is doing what it can with a bold $1.2 trillion move to push down interest rates on mortgages and other debt.

It's an effort meant to jump start spending and get the economy moving again. It is a move the stock market seemed to love, surging immediately after the news broke.

The Fed will buy up to $750 billion in mortgage securities, basically half the home loans that will be made this year.

Interest rates on mortgages are already just above five percent. This is likely to shove them down as low as 4.5 percent quite soon.

If it can get people buying homes again, that could go a long way to stimulating the economy.

But also important is the Fed's decision to buy up to $300 billion worth of government bonds. That could help bring down interest rates across the economy and spur lending.

Some Businesses Desperate for Credit

There are still many businesses desperate to borrow like Capps Van & Car Rental in Texas, so hungry for a loan to buy a thousand new vehicles, it put up a billboard.

"The demand's there," said David Capps, owner. "I need to buy some stuff! I want to buy. I want to put Americans to work. I want to buy American-made vehicles."

If businesses like Capps' could do that nationwide, it would mean auto workers could get back to work.

One auto worker wrote a note to Capps.

"The workers really appreciate what you're doing," the letter said. "We don't want hand-outs. We just want the work."

Now the question is, will lower interest rates and still more money in the system help get the economy going and growing again? Only time will tell.

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Paul Strand

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