The Federal Reserve and the Treasury have announced plans to create essentially a government bank and to pump $800 billion into new lending programs in the latest attempt to revive the nation’s crippled financial system. The government has now assumed nearly $8 trillion in direct and indirect financial obligations over the past year. Under the latest plan, $600 billion will be spent to buy mortgage-related debt and securities and $200 billion to back financing for other forms of lending, including credit cards, auto purchases and loans for students and small business.

Treasury Secretary Hank Paulson: “It will take time to work through the difficulties in our market and our economy, and new challenges will continue to arise. I and my regulatory colleagues are committed to using all the tools at our disposal to preserve the strength of our financial institutions and stabilize our financial markets, to minimize the spillover into the rest of the economy.”