Political issues are largely dependent on the daily needs of the population, and the credit crunch directly affected the wage earners. Rising unemployment has prompted the Federal Reserve to cut down its lending rates. The percent of jobless people in the nation rose from 7.5% in May to 7.8% in June this year. It is also being said that these rate cuts, backed by republican policies, may be too late to help as the time lag before the lowered rates seep into the economy to encourage growth, investment and spending, is about six months. Economists argue that the economys recovery has been held back due to the huge debts of the customers and business expenses [4]. It would be relevant to mention that the current account is an extremely important tool that can determine the entire business cycle of a country as the current account can be determined according to trade balance as the difference of import and export of tangible goods and services like consulting and legal. Current account is also instrumental in determining the overseas factor incomes like dividend and income along with the net overseas Unilateral Transfers like gifts, grants, and aids [5].
In the US, five of the leading banks of the world, including the Federal Reserve Bank of USA came together to invest huge amounts of fresh money into the global market to combat the international credit crunch failing economy with about one trillion dollars.[6] Under such circumstances, the most inn
ovative plan to diminish the credit crunch has been to increase lending with the motivation to restore liquidity to troubled markets and look after the demands of the inter-bank loaning facilities [7]. Obamas plan of financial change related to the current crisis influenced the Federal Bank to decrease the interest rates on lent amounts and lengthen the time limit for the repayment of the loan. Term Auction Facility was adapted as a scheme for slow banks through which loans at a cheaper rate could be made available from discounts windows and the deals were guaranteed anonymity [8].
Under such parameters, the fundamental bailout plan, represented by McCains republican party, Hank Paulsons $700 million no-strings-attached proposal was disapproved by the US House of Representative [9]. There is, however, Obamas Democrats instrumented a second bailout plan. It is referred to as Plan B. The Federal Reserve endorses this plan after the failure of the Plan A. It has been reported, tax credits for the production and use of renewable energy sources, like solar energy and wind power have been. Possible other inclusions originating in the House bill are an extension of the unemployment benefits, protection from foreclosure for individuals, and tax credits for low and medium-income households.[0] Under such parameters, it can be stated that this plan was initially supposed to be workable, but a Plan C was initiated to be effected as a proper bailout method.