The economy shrank more than expected in the third quarter and home prices fell to levels not seen since early 2004 as the government announced new plans to provide $800 billion to boost consumer spending and home buying.

Treasury Secretary Henry Paulson said key markets for consumer debt such as credit cards, auto and student loans essentially came to a halt in October, and that the new programs are aimed to get lending back to more normal levels.

Meanwhile, data released Tuesday provided further proof the country is almost certainly in the throes of a painful recession.

The Commerce Department's updated reading on the economy's performance showed gross domestic product shrank at a 0.5 percent annual rate in the July-September quarter, weaker than the 0.3 percent rate of decline first estimated a month ago, and the worst showing since the third quarter of 2001.

GDP measures the value of all goods and services produced within the U.S. and is considered the best barometer of the country's economic fitness.

Meanwhile, the Standard & Poor's/Case-Shiller national home price index released Tuesday tumbled a record 16.6 percent during the quarter from the same period a year ago. Prices are at levels not seen since the first quarter of 2004.

In an effort to increase the availability of home loans to borrowers, the Federal Reserve said it will purchase up to $100 billion in direct obligations from mortgage giants Fannie Mae and Freddie Mac as well as the Federal Home Loan Banks. The Fed also will purchase another $500 billion in mortgage-backed securities, pools of mortgages that are bundled together and sold to investors.

The $600 billion effort on mortgages came as the Fed also unveiled a new program to help unfreeze the market that backs consumer debt such as credit cards, auto and student loans.

The program on consumer debt will lend up to $200 billion to the holders of securities backed by various types of consumer loans. Paulson said recently that the government was working on the new program, which will be supported by $20 billion of credit protection provided by the $700 billion bailout fund.

The government, while looking to reduce fear in the credit markets, is eager to see lenders like credit card companies resume more normal levels of lending to help stimulate the economy. Since September, when credit markets first froze, financial institutions have been hesitant to hand over money for fear they won't be repaid.

That, in turn, has made it harder for businesses and consumers to borrow.

Meanwhile, Wall Street was poised to extend its advance to a third day. The Dow Jones industrial average added more than 70 points in morning trading Tuesday.

Meanwhile, the New York-based Conference Board says its Consumer Confidence Index for November was 44.9, up from a revised 38.8 in October. Last month's reading was the lowest since the research group started tracking the index in 1967.

Economists surveyed by Thomson Reuters expected the November reading to slip to 37.9. Still, this month's figure hovers around levels not seen since December 1974, with Americans' views on the economy the gloomiest in decades as they grapple with massive layoffs, slumping home prices and dwindling retirement funds.

Consumers nationwide are reeling from job losses, tanking investment portfolios and sinking home values. They are expected to hunker down further in the coming months, making it likely the economy will continue to shrink through the rest of this year and into 2009, more than fulfilling a classic definition of a recession: two straight quarters of economic contraction.

AP Business Writers Jeannine Aversa, Martin Crutsinger, Tim Paradis and J.W. Elphinstone contributed to this report.

Copyright 2008 Associated Press. All rights reserved. This material may not be published broadcast, rewritten, or redistributed

U.S. Consumers Dropping Shopping

Bernanke holds out rate-cut hopes as government reports October retail sales dive.

By David Kiley

GOP to Detroit: Drop Dead

Democrats may have been the big victors on Election Day. But the Republicans still in charge in the White House and representing a possibly immovable minority in the Senate may keep the U.S. auto industry from getting the help it needs before Barack Obama is inaugurated as President in January.

To convince wary Republicans to go along with a rescue package, a House bill being crafted would give the government stock warrants, an equity stake in the automakers. It also has a provision that would put taxpayers at or near the head of the line for debt repayment when the companies recover.

Without at least $15 billion in loans, General Motors (GM), say insiders, could face bankruptcy next year. The total loan package sought by Democrats for automakers and their suppliers could be as high as $50 billion, a number floated by aides to President-elect Obama.

GM's CEO G. Richard Wagoner Jr. said Thursday, Nov. 13, in an interview with Automotive News that he is willing to accept just about any condition on the loans he has heard expressed by political leaders. "Whether that's stock warrants, restrictions on executive compensation and golden parachutes, we've said we're very willing to accept those," Wagoner said. In announcing GM's fifth straight quarterly loss last week (BusinessWeek.com, 11/7/08), Wagoner said GM may run out of cash to operate before mid-2009.

Questions for the Auto Chiefs

Chrysler CEO Robert Nardelli said Thursday that he doubted his company could survive without government loans. "It would be very difficult to make it through this unprecedented downturn" without help, he said at a conference in Palm Desert, Calif. At the same time, said Nardelli, the automaker "cannot assume we are going to get financial assistance" and may have to close two more assembly plants.

The House and Senate committees overseeing the financial-services industries have called hearings on Nov. 18-19 that will involve testimony from the CEOs of GM, Ford (F), and Chrysler, as well as other authorities from the auto industry. Last week, hearings were considered unnecessary. But there is so much mounting GOP opposition to auto industry loans that Representative Barney Frank (D-Mass.) and Senator Chris Dodd (D-Conn.), the chairmen of the House finance and Senate banking committees, respectively, changed course.

Questions for the group are expected to focus on the following:

• How did GM get to the point of near-bankruptcy?

• What kinds of guarantees can you offer Congress that your companies will be viable after a possible infusion of loans?

• How sure are you that you will be able to pay it back? How real is the threat of more than a million jobs going away if GM files for Chapter 11?

• Why are you so top-heavy in trucks and SUVs, when Toyota (TM) and Honda (HMC) are not?

• How specifically will you use the liquidity?

To GM and Chrysler:

• Will you use the money in 2009 to help achieve a merger of your two companies? If so, why is it necessary?

• Will you commit to significant restrictions on executive compensation as a condition of these loans?

OMAHA, Nebraska (CNN) -- Nebraska officials said they're concerned about an apparent rush by parents to drop their teenage children off at hospitals before lawmakers change the state's troubled "safe haven" law.

Four children have been dropped off at Nebraska hospitals in the last two days.

The latest cases came on the eve of a special session of the Legislature on Friday to add an age limit to the law. On Thursday, a boy, 14, and his 17-year-old sister were dropped off at an Omaha hospital; the girl ran away from the hospital, officials said. A 5-year-old boy was left by his mother at a different hospital, officials said.

The day before, a father flew in from Miami, Florida, to leave his teenage son at a hospital, officials said.

"Please don't bring your teenager to Nebraska," Gov. Dave Heineman told CNN. "Think of what you are saying. You are saying you no longer support them. You no longer love them." Watch as lawmakers convene to change law »

Nebraska's safe haven law was intended to allow parents to hand over an infant anonymously to a hospital without being prosecuted. Of the 34 children who have been dropped off at hospitals, officials said not one has been an infant.

All but six have been older than 10, according to a Nebraska Department of Health and Human Services analysis.

State officials said because of legislative procedures it will take at least a week to change the language of the safe haven law, creating a window where more parents could try to take advantage of the loophole in the statute.

"We are ready and prepared that that situation occurs," said Todd Landry of the Nebraska Department of Health and Human Services. "We want people to understand that this is not the right way of getting the service for your child, your teenager or your family."

State Sen. Tom White said lawmakers have been caught off-guard by the number of teenagers taken in under the law.

"What you've seen is an extraordinary cry for help from people all across the country," White said. "Nebraska can't afford to take care of all of them. Nebraska would like to be able to, but they know that we can't so we are going to have to change the law."

There's growing support among many Nebraska lawmakers to limit the safe haven law to children no older than three days. But several lawmakers said they'll push for something closer to a 30-day age limit.

The safe haven law was meant to protect infants, but there is no age limit under the current law. Five of the abandoned children were brought to Nebraska from out of state. Parents have traveled into Nebraska from Michigan, Indiana, Iowa, Florida and Georgia.

Tysheema Brown drove from Georgia to leave her teenage son at an Omaha hospital.

"Do not judge me as a parent. I love my son and my son knows that," Brown said. "There is just no help. There hasn't been any help."

Safe haven laws allow distraught parents, who fear their children are in imminent danger, to drop them off at hospitals without being charged with abandonment. Nebraska was the last state in the country to pass such a law. But every other state included an age limit.

The Department of Health and Human Services published a background profile on 30 of the 34 safe haven cases. The report found:

There are 6,600 children in state custody, according to the Department of Health and Human Services. Per capita the figure is one of the highest rates in the country, Landry said.

"I think this has spurred some really healthy conversations about how do parents get the help that they need when they are struggling with some of these parenting issues," he said.

"And the message that we have been trying to get out is, 'Don't wait until it's a crisis. Reach out to your family and friends.' "

WASHINGTON -- Consumer spending dropped in September by the largest amount in four years, while incomes suffered because of Hurricane Ike.