President Barack Obama said on Tuesday he saw little hope of near-term improvement in the US economy after a staggering drop in gross domestic product in the final three months of last year. "The economy's performance in the last quarter of 2008 was the worst in over 25 years. And frankly the first quarter of this year holds out little promise for better returns," Obama said in a speech at the Department of Transportation.
He said one of the main challenges facing his government was to unlock frozen credit markets and that the launch on Tuesday of a new lending facility by the Federal Reserve and the Treasury was key to that effort. The consumer lending initiative will generate up to $1 trillion in lending, officials said.
"This will help unlock our credit markets, which is absolutely essential for economic recovery," Obama said, speaking two weeks after signing a $787 billion stimulus package aimed at jolting the world's largest economy out of recession.
Senior White House adviser Christina Romer said the stimulus package could pack a big punch because households and businesses struggling to get credit were more likely to spend the money.
"I think it is possible that fiscal policy will have even more oomph in this situation," Romer, who heads the Council of Economic Advisers, told an economics conference. Obama, a Democrat who took over as president six weeks ago from Republican George W. Bush, is hosting British Prime Minister Gordon Brown for talks that will focus on the ailing US financial sector and the global economic crisis.
The US economy suffered its deepest contraction since early 1982 in the fourth quarter of last year, plummeting at a 6.2 percent annual rate as consumers pulled back sharply on their spending. The grim data has contributed to the huge sell-off in the US stock market, which hit a 12-year low this week.
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