Fed to pump extra $1.0t into financial system

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From Fazle Rashid
NEW YORK, March 19: The US Federal Reserve in a bid to salvage a sinking economy has decided to pump in an extra $1.0 trillion into the financial system by purchasing Treasury bonds and mortgage securities. This is double of what Fed did in 2008.
The action makes the Fed a buyer of long term government bonds rather than short term debt that it typically buys and sells to control the money supply. The idea is to encourage more economic activity by lowering interest rates and to help the financial system as it struggles under the crushing weight of bad loans and money supply, the New York Times (NYT) in a report said today.
It is not the Federal government but a straight forward New York attorney general Andrew Cuomo who has been able to force Merrill Lynch and American International Group ( AIG ) employees who were paid hefty bonuses to return a part of the payment
Andrew Cuomo is unearthing some of the most closely guarded secrets on Wall Street : the identities of Merrill Lynch employees who collected large bonuses even as the firm lost billions. He will also unveil the names of those receiving bonuses at the AIG. Many Wall Street titans are likely to come under closer scrutiny of their accounts books. These bonuses have been described by analyst as " humiliation for the Wall Street and a travesty for taxpayers". The Wall Street has been called the " Street of Shame ".
The decision to inject $1.0 trillion more to revitalise and revamp a sagging economy has been received with mixed feelings. Once this scheme is fully implemented, its balance sheet could approach $4000 billion nearly a third of the size of the US economy. A swollen Fed balance sheet runs the risk of totally upsetting the market. The US central bank may find it difficult to manage down the money supply when the economy turns raising the possibility of inflation, a reputed paper said.
Europe risks being the last region to extricate itself out of the economic downturn unless it forges a unity and confront the economic crisis together. An analyst taking to a reputed paper called upon political leaders to halt the rise of protectionism, renew urgently their commitment to complete the frequently stalled Doha round of talks and increase supply of trade finance.
FAO said poor countries will suffer the impact of high food prices. The bleak prospect is likely to be compounded by sharply lower economic growth and remittances. The food prices in Asia were higher than a year ago. The cost of rice in India has risen to Rs.22 a kilo from Rs 18 and the cost of wheat in Pakistan is 24 per cent higher than what it was last year. The number of hungry people in the world jumped to a billion because of record price hike, a reputed paper quoting FAO reported.
The World Bank (WB) lowered yesterday its economic growth forecast for China this year to 6.5 per cent down from 7.5 per cent after huge falls in exports and shrinking private sector investments. The world is looking to China to provide the leadership for the global economic resurgence.
The global shortfall in trade finance, the lifeblood of international trading system has soared to about $100 billion The gap between demand, and supply of, credit has widened by $25 billion in spite of plunging of trade volumes, a meeting sponsored by WTO was informed. The total annual turnover of the global trade is $10,000 billion. The brunt is being borne by the emerging markets.
China has rejected Coca-Cola's bid to acquire a Chinese brewing company stoking fear of protectionism and that the decision could "supper Beijing's push to invest overseas"
On the political front, Russia announced it has reached a deal with Iran to supply S-300 air defence missiles. The deal will considerably alter the balance of power in the Middle-East. Russian foreign ministry refused to be drawn into attention. Fulfilment of the contract would depend on development on the international situation