FDIC Chair Bair Says TARP is "Essential"

Consumer prices dropped by the largest amount in the past 61 years last month, as analysts speculate that the government's efforts to stabilize the financial services industry and stock markets may be too reactive and changing too quickly.

Stocks opened lower in trading on Wednesday, with already nervous investors awaiting news about the future of the Big Three auto makers. At the same time, reports offered more bad news about the construction market, which shows the economic crunch has plunged new home construction 4.5 percent -- the lowest level on Commerce Department records.

Reinstitution Called for TARP

The Troubled Asset Relief Program, which was the program first announced by the U.S. Treasury department to buy troubled assets from banks, was called "essential" by Sheila Bair, chair of the Federal Deposit Insurance Corporation, as she addressed government legislators and cited the FDIC's statement to its institutions to engage in loss-mitigation strategies and foreclosure-prevention strategies with mortgage borrowers. The National Credit Union Administration Chairman Michael Fryzel also called on Treasury Secretary Henry Paulson Jr. to reconsider the reversal last week. On Tuesday the NCUA announced its own initiative to assist credit union members who face foreclosure. The Credit Union Homeowners Affordability Relief Program would allow the NCUA through the Central Liquidity Facility to work with credit unions and their members to temporarily lower monthly mortgage payments.

Falling Consumer Prices

A key inflation indicator, the Consumer Price Index fell 1 percent in October according to a report by the Labor Department. This is opposite to the soaring prices consumers dealt with this year, as prices hit a 17-year high in July. Economists and analysts now see a worrisome issue - deflation hitting the economy. While lower prices make for happier consumers, deflation is acknowledged to be a bad sign for any economy, as manufacturers and businesses cut production, which leads to layoffs. A prolonged period of falling prices has not been seen in the U.S. since the Great Depression.

Automakers Plead Case

Detroit's Big Three automakers pleaded their case in Washington on Wednesday, with legislators demanding strict conditions in order to get the $25 billion in bailout money. Representative Barney Frank drafted legislation that would only allow the automakers to get the money if no dividends were paid and bonuses were restricted to people making $200,000 or less. The Big Three would have to file plans to increase efficiency by March 31 under the proposed legislation.

About the Author

Linda McGlasson

Linda McGlasson

Managing Editor

Linda McGlasson is a seasoned writer and editor with 20 years of experience in writing for corporations, business publications and newspapers. She has worked in the Financial Services industry for more than 12 years. Most recently Linda headed information security awareness and training and the Computer Incident Response Team for Securities Industry Automation Corporation (SIAC), a subsidiary of the NYSE Group (NYX). As part of her role she developed infosec policy, developed new awareness testing and led the company's incident response team. In the last two years she's been involved with the Financial Services Information Sharing Analysis Center (FS-ISAC), editing its quarterly member newsletter and identifying speakers for member meetings.

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