By JEANNINE AVERSA, AP Economics Writer Jeannine Aversa, Ap Economics Writer 19 mins ago
WASHINGTON – The Federal Reserve announced Wednesday it will spend up to $300 billion over the next six months to buy long-term government bonds, a new step aimed at lifting the country out of recession by lowering rates on mortgages and other consumer debt.
At the same time, the Fed left a key short-term bank lending rate at a record low of between zero and 0.25 percent. Economists predict the Fed will hold the rate in that zone for the rest of this year and for most — if not all — of next year.
Fed purchases should boost Treasury prices and drive down their rates. That would ripple through and lower rates on other kinds of debt. The last time the Fed set out to influence long-term interest rates was during the 1960s.
The Fed also said it will buy more mortgage-backed securities guaranteed by Fannie Mae and Freddie Mac to help that battered market. The central bank will buy an additional $750 billion, bringing its total purchases of these securities to $1.25 trillion. It also will boost its purchase of Fannie and Freddie debt to $200 billion.
"This is not only going to keep mortgage rates low for a long period of time," said Greg McBride, a senior financial analyst at Bankrate.com. "The mere announcement may produce a honeymoon effect and bring mortgage rates down to even lower levels in the coming days."
In addition, the Fed said a $1 trillion program to jump-start consumer and small business lending could be expanded to include other financial assets.
The program — which is rolling out this week — currently is focused on spurring lending for autos, education, credit cards and loans for business equipment. The government already has announced an expansion to include commercial real-estate assets. Any broadening of the program would be beyond that area.
The Fed's action is keeping Wall Street's big rally alive. After being down earlier in the day, the Dow Jones industrial average added about 30 points in afternoon trading, and broader indicators also rose.
Fed Chairman Ben Bernanke and his colleagues are taking the new steps as the economy sinks deeper into recession.
Since the Fed last met in late January, "the economy continues to contract," the policymakers observed.
"Job losses, declining equity and housing wealth and tight credit conditions have weighed on consumer sentiment and spending," they said.
Businesses, meanwhile, are facing weaker sales prospects and credit troubles have them cutting inventories. Problems overseas have crimped demand for U.S. exports, dealing domestic companies another blow, the Fed said.
Across the Atlantic, the Bank of England last week began buying government bonds from financial institutions as it turned to other ways to help revive Britain's moribund economy. The Bank of England, like the Fed, already had lowered its key interest rate to a record low of 0.5 percent.
Finance leaders from top economies have discussed coordinating actions from their governments and central banks to provide a more potent punch against the global financial crisis.
Still, the Fed hoped its actions, the government's banking rescue effort, and President Barack Obama's $787 billion stimulus of increased government spending and tax cuts eventually will help revive the economy.
"Although the near-term economic outlook is weak, the committee anticipates that policy actions .... will contribute to a gradual resumption of sustainable economic growth," the Fed said.
Obama has urged Americans to be patient, saying it will take time for his revival programs to work.
Bernanke has repeatedly said that stabilizing the nation's financial system is key to turning around the economy. If that can be done, then the recession might end this year, setting the stage for a recovery next year, he said.
But even in this best-case scenario, the nation's unemployment rate — now at quarter-century peak of 8.1 percent — will keep climbing. Some economists think it will hit 10 percent by the end of this year.
The recession that began in December 2007 already has snatched a net total of 4.4 million jobs and has left 12.5 million searching for work.
And the economy is still sinking. It contracted at 6.2 percent in the final three months of 2008, also the worst showing in a quarter-century. Analysts believe the economy in the current January-March quarter is contracting at a pace between 5.5 and 6 percent or more. They expect the economy also will continue to contract in the April-June quarter.
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AP Real Estate Writer Alan Zibel contributed to this report.
During its more than five-month stint on Mars last year, NASA's Phoenix Mars Lander found evidence that liquid water existed at the spacecraft's landing site, some Phoenix team members say.
Water is key to all forms of life as we know it and the discovery of liquid water would suggest a greater opportunity for biology on the red planet.
The new but controversial conclusion comes from observations of a set of "little globules" attached to struts on the lander's legs that were photographed by Phoenix's robotic arm camera over the course of the mission, as first reported at Spaceflight Now.
These globs were seen to apparently move and grow between snapshots, and 22 members of the Phoenix team, including principal investigator Peter Smith of the University of Arizona in Tucson, think that this behavior combined with other Phoenix findings indicates that these blobs might have been liquid water that was splashed up onto the spacecraft as it landed.
The paper making the case for liquid water will be presented on March 23 at the Lunar and Planetary Science Conference in Houston. But not all of Phoenix's team members agree with the paper's interpretation of the globs.
"It's a bit controversial," Smith told SPACE.com. But "obviously they came from somewhere — they weren't there when we launched," he added.
Phoenix touched down at its landing site in the Martian arctic on May 25, 2008. The stationary lander's mission was to search for signs of potential habitability on the red planet, namely, signs that water ice just below the surface was once liquid.
On July 31, 2008, Phoenix confirmed that the hard material it encountered underneath the clumpy surface dirt was indeed water ice. Analyses of dirt done in the lander's onboard instruments also indicated that this ice was likely once liquid and had interacted with the Martian regolith, or dirt, at a period of time in Mars' history when its climate was warmer.
But finding liquid water on the present surface of Mars, which sees temperatures between -20 and -80 degrees Celsius (-4 and -112 degrees Fahrenheight) even in the summer, is a whole different ball game. It was expected that any water ice exposed to the atmosphere would immediately sublimate, or turn to vapor. The Phoenix team saw signs of this when they exposed underground ice in the trenches dug by the spacecraft.
The new report's main author, Phoenix team member Nilton Renno, proposes that perchlorate salts, discovered in the Martian dirt by Phoenix's wet chemistry lab, were concentrated enough in a patch at the spacecraft's landing site that they could lower the freezing point of the water ice, causing it to melt into a salty brine (this is the same phenomenon that causes sidewalk salt to melt down snow and ice in the winter). Nilton and his co-authors think the brine could have been splashed up onto the lander leg when Phoenix touched down.
Of course, Phoenix didn't get any samples of this material and any investigation of the blobs relies on the images taken by Phoenix and knowledge of how perchlorate behaves.
"There's a matter of belief at some level," Smith said.
Smith cautions that the case isn't solved for sure. As Phoenix descended to the surface, its thrusters created a high-pressure, high-temperature environment and blasted ammonia which could have affected the surface below it. There could also be other constituents in the dirt that could affect its chemistry, he said.
But the case for liquid water is compelling, Smith said. Though he added, "I can't say I agree with every statement in the paper."
Michael Hecht, the lead scientist for the instrument that discovered perchlorate, thinks that while the idea of this splash of liquid brine isn't physically impossible, it is "far less likely than simpler explanations," he told SPACE.com.
The imaging of the globules is low resolution, which Smith also pointed out, and some of the apparent changes seen in them could be attributed to changing shadows, Hecht said.
And while perchlorate is an excellent sponge, sucking up water if the surrounding air is warm and dry enough, the temperatures required of the lander mentioned in the paper are too warm and "you would not get liquid droplets of perchlorate brine," Hecht explained.
A more likely explanation, Hecht contends, is that water vapor released by the ground ice stuck to the legs.
The legs would likely be relatively cold compared to the ground during the day, Hecht explained. When sunlight fell on the patches of ice exposed at the landing site, some of that water would sublimate. As that water vapor traveled up through the air, it might encounter cold patches of dirt stuck on the lander legs from the landing and stick.
And "once there's ice there, [other water vapor molecules will] go to the places where there's ice," eventually forming the blobs seen in the photos, Hecht said.
There are circumstances where perchlorate could create liquid brine on Mars though, Hecht said. During periods when Mars might have just a few degrees warmer, perhclorate rinds could melt water ice. Another paper being presented at the Lunar and Planetary Science Conference posits that perchlorates could seep down beneath Mars' polar ice caps, forming a lubricating sludge that lets the ice caps flow.
But these situations are different than the briny blobs described by Renno.
Hecht acknowledges that he could be wrong and the globs on Phoenix could be liquid brine, but "I just don't think it's the likely explanation," he said. "It's just plain old frost, nothing more."
Hecht thinks that the true nature of these blobs will be hashed out over time by the Phoenix team and by reviewers of Renno's paper. (Hecht and Renno, as well as other Phoenix team members, have corresponded at great length over the topic.)
"It hasn't been in front of the jury yet," Hecht said.
Editor's Note: The image showing the globules was added at 11:30 a.m. E.T.
- Video: Digging on Mars
- Phoenix Mars Lander: Digging for Secrets of the Martian Arctic
- Images: Phoenix on Mars
- Original Story: Phoenix Mars Lander Found Liquid Water, Some Scientists Think
