Wave of layoffs here, Europe show severity of the recession

"There is more power than people think for the federal government to pump out funds soon," says Allen Sinai, president of Decision Economics, who has been working with lawmakers on the plan.

"Our recovery will be driven by the federal government. That's different from almost all the recoveries we've seen in the past three decades."

Stimulus plans alone won't be enough.

Bernanke has suggested the government use part of the second half of a $700 billion financial rescue fund created by Congress last year to unlock lending through strategies such as setting up a "bad bank" that would buy troubled assets, taking them off the balance sheets of commercial lenders.

The White House has pledged to use $50 billion to $100 billion of the funding to prevent home foreclosures.

As part of the initial half of the $700 billion Troubled Asset Relief Program, or TARP, the government has pumped in $300 billion in cash to help provide ready capital to banks reeling from fast-declining assets, or help stronger banks such as PNC Financial buy weaker ones such as National City.

The hope was that the cash would help stem losses at banks and ease credit.

In recent weeks, it has become evident that the government's actions failed to prop up the banks, restore much confidence in the financial markets or even inspire much lending. "We're going from one banking crisis to another in a matter of weeks, and we don't know if we're done yet," says Anil Kashyap, finance and economics professor at the University of Chicago's Booth School of Business.

Kashyap says the government needs to take decisive action to stabilize the banking system. "The economy cannot grow if the banking system is impaired."

Contributing: David J. Lynch, Pallavi Gogoi, Julie Schmit and Detroit Free Press

  • 1
  • |
  • 2
  • |
  • 3
  • |
  • 4
Join the Discussion
You are using an outdated version of Internet Explorer. Please click here to upgrade your browser in order to comment.
blog comments powered by Disqus
You Might Also Like...
See It, Share It
PHOTO: U.S. Customs and Border Protection officers at the George Bush Intercontinental Airport in Houston stopped a would be smuggler from bringing nearly 7 ounces of cocaine into the country in tamales, Aug. 22, 2014.
U.S. Customs and Border Protection
Real Housewife Phaedra Parks Lists Home in Suburban Atlanta
Real Housewives of Atlanta star, Phaedra Parks, has listed her 4,000-square-foot home with 5 bedrooms and 6 baths for $340,900.
In this image from video posted on Facebook, courtesy of the George W. Bush Presidential Center, former President George W. Bush participates in the ice bucket challenge with the help of his wife, Laura Bush, in Kennebunkport, Maine.
(Courtesy George W. Bush Presidential Center/AP)