Crude Oil prices recorded the biggest monthly fall in October this year since futures trading began 25 years ago. The continuing tumble in oil prices has been extended by news of a deflated US economy in which demand for oil is likely to remain low for still some time to come.

Crude prices in October came down to $65-levels, thus marking a fall of 32% in a single month. Pump prices on the other hand came down further from the summer peak of $4 a gallon and recorded a drop of almost 40% thus providing much-needed relief to Americans, already under severe financial pressure due to lay-offs, shrinking home values and a continuing economic slowdown. According to an estimate the decline in retail oil prices will bring about savings over $100 billion a year for American households.

Last week’s Prices for crude ended with a modest rally on Friday when they staged a late-session surge after trading low for the most part of the day. Light sweet crude for December delivery settled at $67.81 per barrel on the last day of the week at the New York Mercantile Exchange after falling as low as $63.12 in the earlier part of the day.

Fifth Third Bancorp is set to acquire the failed Florida-based Freedom Bank with the $3.5 billion it is receiving in bail-out payment.

Freedom Bank of Bradenton, Florida became the seventeenth bank in the United States to fail and was shut down by federal regulators on Friday. The bank had total deposits of $254 million while its assets were worth $287 million, according to figures provided by the Federal Deposit Insurance Corporation. The failed bank also had $214 million in loans as of June this year as revealed in a letter to the bank’s shareholders.

The acquisition deal allows Fifth Third to take over the deposits of Freedom Bank besides buying $36 million of the assets of the latter. The rest of the assets will be retained by the FDIC and disposed of later.

Fifth Third Bank is the latest beneficiary of the bail out money and announced last week that it has received $3.5 billion from the $700 billion federal plan to recapitalize the country’s financial system. Based in Grand Rapids, Michigan Fifth Third became the second bank in just a week to initiate a take over after receiving its share of the federal bail out funds. However there have been concerns in some quarters that banks are using the bailout money to finance acquisitions rather than start lending to customers and businesses which had the original intention behind the bailout plan.

Consumer spending in the US for the July- September quarter dropped by the largest amount in 28 years, contracting the rate of economic growth and signalling the onset of a long and painful recession.

On Thursday government agencies reported that in the third quarter, the GDP - which measures the values of all goods produced in the economy - shrank at an annual rate of 0.3% and consumers’ disposable income took the biggest hit on record, falling at an annual rate of 8.7%

While the stock markets took comfort in the fact that things were not worse and Dow Jones Industrial rose by 190 points, economists have warned that the growth rate might come down even further in the quarter from October through December. This would then meet the classic definition of a recession – two successive quarters with shrinking GDP.

The decline in growth rate in the third quarter was mainly brought about a dramatic cutback in consumer spending. Burdened with stagnant wages, loss of jobs and falling home prices, consumers tightened their purse strings and spent only on the essentials. According to the government report, the fall in consumer spending was the first in 17 years and the 3.1% cutback was the biggest since the spring of 1980 when the economy went through one of the worst downturns since the Great Depression.

Federal data revealed on Thursday that banks in the US borrowed a record sum of $112 billion from the Federal Reserve last week, as credit lines continued to remain largely frozen in the aftermath of the global financial crisis.

Data from federal sources put the average daily amount borrowed by commercial banks from the Federal Reserve’s emergency lending fund at a record $111.9 billion over the past week. The most recent figures reveal an increase of $6.1 billion from the $105.8 billion that the Federal Reserve loaned out to the banks in the previous week.

However there was a decline in the amount of money borrowed by investment banks from the Federal Reserve’s emergency lending source. In the past week the investment banks borrowed $87.4 billion a day on an average which was $23.9 billion less than the amount of $111.3 that they borrowed a week ago. The reduction in the amount of money borrowed by investment banks may be due to speculation that the Federal Reserve is preparing to invest around $250 billion in banks.

Banks and financial institutions have taken recourse to borrowing from the Federal Reserve since the conventional credit channels still remain largely clogged in the wake of last month’s financial market crisis.

The American Insurance Group said on Thursday that it will benefit from the Federal Reserve’s new commercial paper program, by reducing its reliance on the costlier emergency loan from the Federal Reserve.

Under the new program, AIG will be able to borrow up to $20.9 billion thus increasing its maximum credit limit from the Federal Reserve to $144 billion under three separate programs. The amount of credit raised by AIG from the Federal Reserve already includes an earlier emergency loan of $85 billion that carries a relatively higher rate of interest.

The massive amounts of loans required by AIG are a pointer to the extent of the company’s losses incurred in credit-default swaps. The first indication that AIG was in the midst of a severe cash crisis came in mid-September. However at that time the original amount of money needed by the company was put at a modest $20 billion and which seemed to be more than adequately met by a generous $85 billion loan extended by the Federal Reserve a few days later. In recent weeks, however the size of the original federal bailout has snowballed by almost 70%.

According to experts, AIG’s cash needs might grow still more as it uses most of the funds to meet the collateral calls from its derivatives counterparties.