A new bank bailout plan of nearly $1.5t has just been unveiled by the US Treasury Secretary timothy Geithner.

The plan has been designed to expand the size of a major Federal Reserve lending program from previous $200bn to $1 trillion.

Furthermore, the additional funding will also be used to develop a public-private investment fund of $500bn for absorbing toxic assets of the banks and it would be expanded to nearly $1 trillion.

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Figures from the commerce Department show that between July and September, the US economy has shrunk at an annualized rate of 0.3%.

Though they showed the sharpest contraction of the economy since 2001, the gross domestic product (GDP) figures were better than expected. On the other hand, consumer spending that constitutes two-thirds of the US economy saw 3.1% shrinkage and it was the first contraction since 1991. This 0.3% shrinkage followed 2.8% growth during the last three-month period.

The figures related to shrinkage suggest that the US economy is halfway to the standard definition of a recession that shows two successive quarters of negative growth.

However, in the US the official definition is different and according to this definition the US economy is not officially in recession if the National Bureau of Economic Research doesn’t decide it.

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