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Recession Deepens
By: ratetake

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Another disappointing day on Wall Street led investors to 200 point loss. With no signs of recovery stocks are expected to continue its decline for a few weeks.

An economic stimulus plan that was endorsed by President-elect Barack Obama is not likely to be endorsed by Congress. Many Republicans in the Senate and House have criticized the stimulus plan as additional burden to taxpayers saying that the money provided would not allow economy to move ahead quick.

Obama said if Congress does not pass such a measure this year, it would be at the top of his agenda once he becomes president. The Philadelphia Federal Reserve said the U.S. economy fell into recession last spring and will contract sharply this quarter as more than 200,000 workers per month are added to the rolls of the unemployed.

Banks are still struggling amid help from government bailout. Event though there are signs that banks are starting to lend, job losses in banking sector are increasing. Citigroup Inc. is cutting another 53,000 jobs in the coming quarters. It plans to lower expenses by about 20 percent and has reduced its assets by more than 20 percent.

Bad economic data are pouring into market as investors battle stocks with sell offs at the end of the trading day. Analysts still believe that market might be moving even lower, searching for the bottom and that this volatile market will stay for a while.

Wall Street is looking if bailout money will be used to provide help for automakers as the Bush administration stated that the funds from $700 billion package were not provided for automakers. But rather to use funds from a Department of Energy program previously approved to develop fuel-efficient vehicles.

During last days of President Bush, the administration will be using only half of $700 billion package and the other half would be available to Obama's administration as they would decide whether and how the funds should be spent.

The U.S. Treasury Department said Monday it had transferred $33.56 billion to 21 banks as part of a capital infusion program. In return, Treasury would receive preferred shares of the banks.

Another bailout may be needed for Insurance Companies as their losses are piling. Insurance Companies are now in standstill until government approves their request for bailout money. The money will come out of $700 billion rescue package. Life insurers have been hit hard by large investment looses.

The Philadelphia Fed's survey said the U.S. economy entered a recession in April and that it will last 14 months. It predicted gross domestic product would shrink by 2.9 percent in the fourth quarter and the economy would shed an average of 222,400 jobs per month.

U.S. Consumers are wary of economic problems and nowadays are leaving plastic at home and dealing with cash. It is back to basics for many consumers as confidence has declined.

First cut was homes in consumer confidence as it comes with 30 year commitment or mortgage, than came cars, typically financed for five years. Now it spreads to goods as retailers are feeling the pinch.

With the mountain of debt, the delinquency rate on credit cards rose to 4.9 percent in the second quarter of this year, according to Federal Reserve data. The percentage of credit card debt that banks have written off is even higher at 5.47 percent, and that figure will likely rise in the coming quarters. Deutsche Bank analysts said charge-offs were up more than 50 percent last month at six of the 11 credit card issuers that they survey.
Luxury retailers are the ones that are hurt the most as week sales continue to move even lower.

That is precisely what the U.S. government is trying to avoid. The Treasury wants to use some of its $700 billion rescue fund to guarantee consumer lending in the hope that doing so will get money flowing again. It may not be enough because even those with plenty of credit appear to be curbing their spending.

The national average price for regular gas was dropping 1.8 cents to $2.087 a gallon, according to AAA. That is nearly $1 a gallon below what it was a month ago and nearly $2 below where it was in July when prices peaked at $4.11 per gallon.

Article Source: http://www.depositarticles.com

Susan Duey represents RateTake Mortgage marketplace. RateTake matches consumers with multiple lenders offering low mortgage rate quotes. Visit Refinance Mortgage to get your current mortgage rates.

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