Economic toolbox almost empty

By The Associated Press | Published: October 10, 2008 Comment on this article

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Economist talks about financial meltdown

Oct 9Economist Mark Dotzour talks about the financial meltdown.

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The commitment of $700 billion didn’t impress markets here and around the world. Neither did fresh interest rate cuts. Stocks plunged yet again on Thursday.

The government still has some unused options — like buying up foreclosed properties and making direct loans to homeowners — that might ease the credit and housing crises and brighten the economic outlook.

But the options are dwindling and generally involve partly taking over private companies, an idea that’s anathema to economic conservatives and others in America.

Even as policymakers counsel patience in waiting for the medicine already prescribed to fully kick in, they are searching hard for other approaches.

"So long as financial conditions warrant, we will continue to look for ways to reduce funding pressures in key markets,” says Federal Reserve Chairman Ben Bernanke.

How low can rates go?

The Fed’s primary tools are lowering interest rates and flooding the system with money.

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