2008-7-18
This is IN THE NEWS in VOA Special English.
This was not a good week for American economic news.
Ben Bernanke gave his midyear report to Congress. The central bank chairman said "the economy continues to face numerous difficulties." These include ongoing pressures in financial markets, falling house prices and a softening labor market. They also include rising prices of oil and food.
Ben Bernanke told lawmakers that inflation is too high. He said a top priority of the Federal Reserve is to bring it under control. He says that whether the economy is technically in a recession or not, families clearly are facing hardship.
The Commerce Department said Americans spent less on cars, furniture and restaurant meals last month as fuel prices rose.
In the housing market, some experts say the worst may not be over yet. Last Sunday, the government announced a rescue plan for America's two biggest mortgage finance companies, Fannie Mae and Freddie Mac.
The Treasury and the Federal Reserve said the government is prepared, if needed, to lend them money and buy some of their stock. The plan requires congressional approval.
Fannie Mae is the Federal National Mortgage Corporation. Freddie Mac is the Federal Home Loan Mortgage Corporation. They own or guarantee more than five trillion dollars of mortgages, almost half of all housing debt in the country.
Congress established them but they are owned by shareholders and publicly traded. Fannie Mae was created in nineteen thirty-eight as a result of the Great Depression. Freddie Mac was created in nineteen seventy.
Fannie and Freddie help lower borrowing costs for millions of homebuyers. They are called government-sponsored enterprises. They are not officially guaranteed by the government. But financial markets have always trusted that the government would never let them fail.
Now, after billions in losses, President Bush is urging Congress to act quickly on the legislation. Critics of the rescue plan see a huge risk for taxpayers.
Adding to investor concerns this week was one of the biggest bank failures in American history. California-based IndyMac was a major home lender. The government seized the bank last Friday after people started taking their money out.
IndyMac is among more than twenty banks under criminal investigation for possible wrongdoing in the mortgage lending industry.
At the White House, President Bush told a news conference on Tuesday that the banking system "basically is sound." He pointed out that deposits are protected by the government up to one hundred thousand dollars.
He also noted that the economy has continued growing, though slower than he would have liked. "We're going through a tough time," he said, adding, "I believe we will come through this challenge stronger than ever before."
And that's IN THE NEWS in VOA Special English, written by Brianna Blake. I'm Steve Ember.