In what could be termed as world's biggest bail out US government decided to give $300 billion bail out from US treasury to the financial institution that are bearing the brunt of it. This major issue has been a cause for world wide crisis and major recession in US.

 

 

 

A variety of factors have contributed to an increase in the payment delinquency rate for subprime ARM borrowers, which recently reached 21%, roughly four times its historical level.

Easy credit, combined with the assumption that housing prices would continue to appreciate, also encouraged many subprime borrowers to obtain ARMs they could not afford after the initial incentive period. Once housing prices started depreciating moderately in many parts of the U.S., refinancing became more difficult. Some homeowners were unable to re-finance and began to default on loans as their loans reset to higher interest rates and payment amounts. Other homeowners, facing declines in home market value or with limited accumulated equity, are choosing to stop paying their mortgage. They are essentially "walking away" from the property and allowing foreclosure, despite the impact to their credit rating.

 

 

 

The over all effect being that a lot of major companies in US have gone bankrupt since then. After affecting the financial sector the crisis has moved on to effect service sectors and other industries.

 

 

Manufacturers (down 52,000), construction firms (down 39,000) and retailers (down 34,000) all slashed jobs last month while an increase of only 26,000 jobs in the services sector was the weakest since October 2005. The cause of this melt down is no liquidity in the market.

 

 

 

Bush's step could be cause for a new sign of growth for US and the world. Economists around the world are hailing his decision as Revolutionary. The whole of US erupted in crazy celebrations after this announcement.

 

 

Celebrations in US after the announcement

 

 

The White house representative in press release said the Mr. Bush was inspired by Indian Finance Minister Mr. Chidambaram's decision to wave off loans for the farmers in trouble there. "Mr. President thought that if Mr. Chidambaram could do it for his country, US could take such losses for the sake of whole world".

 

 

 

The decision could have major impact on US elections also, with Republicans sure to use this decision in their benefit upsetting Obama and Clinton and co.