Economy

December 1 - The National Bureau of Economic Research's (NBER) Business Cycle Dating Committee determined formally on November 28th that the U.S. economy is in a recession. The Committee found that the economy peaked in December of 2007, ending a 73 month period of economic expansion. Although two months of negative economic growth is a common rule of thumb for determining whether or not the economy is in recession, the Business Cycle Dating Committee uses a more complex set of measures to make the formal declaration. The Committee defines a recession as "a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators."

The current recession is already longer than 8 of the last 10 postwar recessions, with the average being 10 months. Although the Dating Committee does not make any projections, many experts believe the economy will not bottom out until the middle of 2009, at the earliest -- which would make it the longest recession since the Great Depression.

November 25 - The Federal Reserve pledged an additional $800 billion today across several different initiatives to help unfreeze credit markets.  $100 billion of funds will go to purchasing debt directly from Fannie and Freddie Mae, while another $500 billion will be used to purchase mortgage-related securities backed by Fannie, Freddie or Ginnie Mae.  The final $200 billion will be lent through the newly-formed Term Asset-Backed Securities Loan Facility (TALF) to support loans for consumers and small businesses.  For a chart of other recent actions by government in response to the financial crisis, see pages six and seven of CRFB's "Guide to Stimulus Proposals"

November 21 - Recently, House Majority Leader Steny Hoyer (D-MD) addressed the National Press Club, expressing the need for both short-term, deficit-financed stimulus and long-term fiscal responsibility. As Hoyer explained:

"Fiscal hawk that I am, I still believe that [more borrowing] is the right course, because a wide consensus of economists tells us that deficit spending is both the way out of recession like this one and the way to prevent even more catastrophic decline."

At the same time he argued:

"In the long run, fiscal responsibility can and must be a watchword of our majority... We are now experiencing the stark, painful reality that debt does, indeed, matter...We must pay for what we buy, but more than that, we must buy the right things. Wise investments will grow our economy, guard our national security, and protect the health of our people... We have a window to truly set our fiscal house in order, ensuring the public and the markets that, even as we make necessary investments today, we are prepared for the years to come."

November 14 - Troubled mortgage firm Freddie Mac disclosed today that it lost $25 billion from July through September, and now has assets exceeding its liabilities.  Freddie Mac has asked for the government to provide $14 billion of the $100 billion which was authorized for the federal conservatorship of Freddie Mac and Fannie Mae.  On Monday, Fannie Mae announced that it had lost $29 billion in the third quarter, and may also have to tap part of its $100 billion rescue fund.