US to act over recession fears

Federal reserve chairman says urgent action needed to prop up US economy.

    On Wall Street, US banking giant Merrill Lynch posted a $10bn loss for its fourth financial quarter [EPA]

    Stocks fell on Bernanke's economic assessment, with the Dow Jones industrial average falling 60.24, or 0.48 per cent, to 12,405.92.
    The US economy has been rocked by the sub-prime mortgage crisis, where people with poor credit were offered mortgages only to default on the repayments, leading to a wave of repossessions and bank losses.
    Bernanke, speaking to the US house budget committee, did not provide further specifics of the plan, other than indicating it could include tax rebates and interest rate cuts and warning that its design and implementation would be "critically important".
    The White House also said on Thursday that it believed an economic "boost" was necessary.
    It said George Bush, the US president, would hold meetings with senior officials from the Democrat-controlled US congress to discuss "the economic landscape".
    Merrill Lynch loss
    Meanwhile on Wall Street, US banking giant Merrill Lynch posted a $10bn loss for the fourth financial quarter, citing the sub-prime mortgage crisis.
    The loss is reportedly the biggest in the bank's history.
    The results followed the bank's $2.3bn loss in the third financial quarter.
    Other banks, including Citigroup, UBS and Morgan Stanley, have also posted huge losses following the sub-prime crisis.
    In other economic news, US home-building projects that were started in December fell by 14.2 per cent - their lowest level in more than 16 years - and permits for future building hit a 14-year low, a US government report said.
    Weak economic data has intensified fears of a US recession and increased pressure on the US government for an economic stimulus plan.

    SOURCE: Agencies


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