US stimulus package is biggest ever, but may still not be enough

BOSTON - The Federal Reserve has offered more than US$3 trillion in loans and asset purchases in recent weeks to stop the US financial system from seizing up, but it has not yet directly helped large swaths of the real economy: companies, municipalities and other borrowers with less than perfect credit.

On Friday, the Treasury got about US$450 billion more from Congress as part of a US$2.2 trillion US stimulus package, greatly increasing its ability to support the economy. Before the bill passed, the stabilization fund had about US$93 billion in assets as of the end of February. Scott Minerd, chief investment officer of Guggenheim Partners and member of an investor committee that advises the New York Federal Reserve on financial markets, told Reuters he believes the government needs to give the Treasury about US$2 trillion to help prop up the economy.

With the US$2 trillion that he recommends, he said,"you're on your way to have something of a big enough scale to get things propped up." WEAKER CREDITS Investors said losses would likely increase, however, if the government has to reach deeper into the economy. And they are betting the Fed will have to do so - junk bonds rallied last week, for example.

In time, as they see how the programmes for higher-quality borrowers play out, they may grow more comfortable with casting a wider net and explore ways to get cash to shakier corporate borrowers while limiting their risk. The Fed is justifying its move as help to companies that are caught in a situation not of their making, said Nellie Liang, former head of the Fed's financial stability office and now at the Brookings Institution think-tank.

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