US officials unveiled new steps on Monday to free up credit for crisis-hit small businesses a day after a meeting of top global policymakers pledged further efforts to tackle the economic malaise.
The US Treasury said it will move to ease a credit freeze to small businesses by pumping up to US$15 billion into the sector.
The unusual effort to buy up securities linked to small business loans aims to “jump-start” credit in the sector, which has been frozen because investors are unwilling to purchase bundled loans that are “securitized.”
US President Barack Obama, discussing the new effort, said it was being launched in response to a situation where “small business owners are really struggling even though they’re maintaining profitable businesses [because] their credit lines are being pulled.”
“This is still just going to be a first step in what is going to be a continuing effort to make sure that people get credit out there,” he said.
The action by the Treasury comes on top of a move by the Federal Reserve to pump up credit for business and consumers hurting from a global credit crunch, with the banking system reeling from massive losses linked to the US housing meltdown.
The move came after finance chiefs from the G20 economies meeting in the UK over the weekend to prepare for a summit on April 2 said their countries would take “whatever action is necessary” to fight the crisis.
But US appeals for governments in other leading economies to pump more public money into economic stimulus packages have been received coolly by France and Germany, which see tighter regulation as the solution.
British Prime Minister Gordon Brown said he believed China would agree on the need for new fiscal and monetary measures to tackle the global downturn at the upcoming G20 summit.
Brown was speaking after talks with European Commission head Jose Manuel Barroso to prepare for the summit in London of the leading and fastest-emerging economies, which China will attend.
“I think there will be an agreement with China on the need to reform our international institutions to make them more adequate for the challenges of the times, and an agreement on the fiscal and monetary effort that is needed to get us through this downturn,” Brown said.
In Japan, embattled Prime Minister Taro Aso convened a panel of experts to gather ideas for a new stimulus package that media reports said may total about US$200 billion.
The talks started as the Cabinet Office in its latest monthly report said Japan’s economy was still “worsening rapidly” and “in a severe situation” — the same overall economic assessment as in the previous month.
This month’s report said corporate profits, exports and industrial output were all “decreasing very substantially,” the employment situation was “getting worse rapidly” and private consumption was “decreasing modestly.”
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