Economists cast doubt on Fed plan
China Daily | Updated: 2008-11-27 08:07
The Federal Reserve's new $800 billion effort to combat the financial crisis is designed to make credit more accessible to shaken consumers who aren't sure they want more debt.
Households and lenders may not respond much because of the wealth destruction from plunging property and stock values, and the deepening economic slump, economists say. That means banks may end up returning the Fed's new liquidity through deposits at the central bank.
"We are sort of spitting in the wind," said Michael Darda, chief economist at MKM Partners LP in Greenwich, Connecticut. "Banks won't be throwing a lot of loans out there when they fear - rationally - those loans may not be paid back."
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