Adding to the woes of Americans reeling from the fallout stemming from the national housing and mortgage crises, recent Wall Street events such as the bankruptcy of Lehman Brothers, the sale of an ailing Merrill Lynch to Bank of America, and the government’s $85 billion bailout of American International Group have had ripple effects extending throughout the entirety of the nation’s credit market.
Speaking in Green Bay, Wisconsin, on September 19, Republican presidential candidate John McCain said he would create a new federal agency, called the Mortgage and Financial Institutions Trust (MFI), that would work to head off the financial crisis.
As of Tuesday, July 15, crowds outside branches of the failed California bank IndyMac were getting ugly. On the second business day after federal agents seized control of bank assets and promised orderly restitution of FDIC-insured funds to IndyMac customers, large numbers of shocked depositors still had not been reimbursed. Those who had more than the FDIC-guaranteed $100,000 in IndyMac accounts were still awaiting word as to what portion of their life savings they could expect to see again.
On Thursday, July 10, Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke testified before the U.S. House of Representatives’ Committee on Financial Services. The backdrop for the committee meeting, of course, is the ongoing turmoil in U.S. and global financial markets, highlighted by the Federal Reserve’s unprecedented intervention to prevent the failure of giant investment bank Bear Stearns, and more recent worries that the two government-sponsored mortgage lending companies Fannie Mae and Freddie Mac are in danger of implosion.
The Consumer Price Index (CPI) measures the average price of consumer goods and services purchased by households. The government uses the CPI to “calculate inflation.” Changes over the past 40 years to the CPI “to better reflect the actual costs” of goods and services in this country have not only provided a poorer reflection of the true costs but have actually harmed our economy.