Thanks, But No Thanks: FED cut rates by a quarter point

[SkinsTerps26]

http://money.cnn.com/2007/12/11/news/economy/fed_rates/index.htm?postversion=2007121115

Fed cuts rates by a quarter point

Ben Bernanke & Co. lower a key interest rate for the third consecutive time to help stave off a recession. But markets plunge as Wall Street was hoping for a bigger cut.

By Paul R. La Monica, CNNMoney.com editor at large

December 11 2007: 3:07 PM EST

NEW YORK (CNNMoney.com) -- The Federal Reserve lowered an important short-term rate by a quarter of a percentage point Tuesday, the latest in a series of rate cuts that the central bank hopes will stimulate an economy some fear is on the brink of a recession.

Stocks plunged following the Fed's announcement. The Dow dropped more than 200 points while the S&P and Nasdaq each fell more than 1.5 percent.

This was the third straight time that Fed Chairman Ben Bernanke and fellow policy makers decided to cut its federal funds rate, an overnight bank lending rate that affects how much interest consumers pay on credit cards, home equity lines of credit and auto loans.

The federal funds rate now stands at 4.25 percent. The central bank also cut its discount rate, which is what banks pay to borrow directly from the Fed, by a quarter-point to 4.75 percent on Tuesday.

One member of the Fed's policy making committee, Federal Reserve Bank of Boston President Eric Rosengren, voted for a half-point cut in the fed funds rate.

In fact, some investors had been holding out hope that the Fed would lower rates by a half of a percentage point as it did in September since several banks have been forced in the past few months to take massive writedowns due to exposure to bad mortgage loans.

"The Fed needed to cut more now in order to fend off the credit crisis that has intensified in the past month," said John Derrick, director of research at U.S. Global Investors, a money management firm in San Antonio with more than $5.5 billion in assets.

Leading up to Tuesday's meeting, several economists indicated that the Fed may need to lower rates several more times in early 2008 in order to keep the economy from slipping into a prolonged slump.

But in its statement, the Fed appeared to have a less dire view of the economy than many on Wall Street, a possible sign that it may not cut rates at its next meeting in January.

The Fed acknowledged that "economic growth is slowing, reflecting the intensification of the housing correction and some softening in business and consumer spending." It also said that "strains in financial markets have increased in recent weeks."

The Fed added that "some inflation risks remain" and the Fed "will continue to monitor inflation developments carefully."

That tone disappointed investors, who had been hoping the Fed would take more decisive action to clean up the mortgage mess that's plaguing Wall Street and is starting to take its toll on Main Street.

"This was a big mistake. They should have at least cut the discount rate by 50 points. I think that was a big disappointment to Wall Street," said William Rutherford, president of Rutherford Investment Management, a money manager based in Portland, Ore. "The Fed must contain the housing problem. If it doesn't, we are definitely heading into a recession."

Concerns that the impact of the subprime mortgage crisis is spreading sparked President George W. Bush and Treasury Secretary Henry Paulson to unveil a plan last week that would freeze interest rates for some subprime borrowers whose adjustable-rate mortgages are scheduled to reset in 2008.

But one market expert said investors were wrong to think that the Fed would keep cutting rates drastically just to save banks and troubled borrowers. :applause: bingo

"The Fed is not going to bail out the market. Time will heal these wounds. People don't want to hear that but it's the real world," said Rich Berg, chief executive officer of Performance Trust Capital Partners, a Chicago-based bond trading firm

Will this do anything to help the housing market?

Hello recession

[Kilmer17]

I was hoping for a .5 point.

My guess is that they will lower it another 2 full points over the next 6 months.

And yes, if they do that, that WILL help the housing market.

[Larry]

I was hoping for a .5 point.

My guess is that they will lower it another 2 full points over the next 6 months.

And yes, if they do that, that WILL help the housing market.

By encouraging MORE people to buy at inflated prices, using money borrowed at artificially low rates?

Granted, there are few people out there who know LESS about the economy than I do. But it seems to me that our government policies need to be encouraging savings and investment rather than debt.

(And I don't own a home, right now, and wouldn't mind if prices fell 20% or so.)

[SkinsHokieFan]

Hello inflation

Thanks for having your priorities completely out of whack Fed

[DjTj]

I was hoping for a .5 point.

My guess is that they will lower it another 2 full points over the next 6 months.

And yes, if they do that, that WILL help the housing market.

Well, the fact that they only went for a quarter point rather than a half point suggests that they are reluctant to really drop the rates.

My thinking is that they just want to get through this rough period and allow things to stabilize. Then, they'll do the rational thing and start raising rates again.

...screw it, I'm tired of trying to predict the Fed. My mortgage broker called, and I think I'm just going to refi and lock in these low rates in a good old-fashioned 30-year fixed rate loan.

[zoony]

Hello inflation

Thanks for having your priorities completely out of whack Fed

No ****.

This whole thing reeks of arrogance. They seem to think that constantly devaluing the dollar is the answer to any economic woes.

Sometimes **** happens, and a slow down or recession occurs. This isn't a bad thing, because history has shown that

(a) recessions usually only last a year or so

( the economy ALWAYS comes out of a recession stronger than its ever been.

The longer the Fed tries to manage the economy with no recession, the bigger the recession will be when it finally does get here.

[The Evil Genius]

By encouraging MORE people to buy at inflated prices, using money borrowed at artificially low rates?

Granted, there are few people out there who know LESS about the economy than I do. But it seems to me that our government policies need to be encouraging savings and investment rather than debt.

(And I don't own a home, right now, and wouldn't mind if prices fell 20% or so.)

Depends on what type of home loans.

ARM's should be only for those who aren't criminally stupid.

[PleaseBlitz]

I also thought it was going to be a 1/2 point.

[GibbsFactor]

No ****.

This whole thing reeks of arrogance. They seem to think that constantly devaluing the dollar is the answer to any economic woes.

Sometimes **** happens, and a slow down or recession occurs. This isn't a bad thing, because history has shown that

(a) recessions usually only last a year or so

( the economy ALWAYS comes out of a recession stronger than its ever been.

The longer the Fed tries to manage the economy with no recession, the bigger the recession will be when it finally does get here.

The recession's been here for a while now, and the Fed is doing "something" to make it look like they did something. Fact is, no one is doing the math of what the inflation hikes are doing to our economy. They are essentially bringing down market prices via inflation of an already weakened currency.

[jbooma]

I was hoping for a .5 point.

My guess is that they will lower it another 2 full points over the next 6 months.

And yes, if they do that, that WILL help the housing market.

yep, they do not want to cut it to fast, the gradual reduction is key

if anyone is waiting to refinance you might want to hold off till next summer when we will really see what happens

looks like next year will be a good year to buy if they rates keep going down

[jbooma]

The longer the Fed tries to manage the economy with no recession, the bigger the recession will be when it finally does get here.

We have been in a recession the past 6 months where the hell have you been

Remember it takes a while before they realize we are in a recession, but all the signs point that we have been in one for almost 6 months.

[SkinsTerps26]

So I guess this means, wait for sometime in 08 to see where this goes?

THe fed is so F-ed up.

[mjah]

looks like next year will be a good year to buy if they rates keep going down

I'm hoping so.

[PleaseBlitz]

No ****.

This whole thing reeks of arrogance. They seem to think that constantly devaluing the dollar is the answer to any economic woes.

Sometimes **** happens, and a slow down or recession occurs. This isn't a bad thing, because history has shown that

(a) recessions usually only last a year or so

( the economy ALWAYS comes out of a recession stronger than its ever been.

The longer the Fed tries to manage the economy with no recession, the bigger the recession will be when it finally does get here.

Im sorry, but what reeks of arrogance is Joes on the internets thinking they know better than the Fed.

Raise your hand if you have a PhD in Economics from MIT.

Raise your hand if you have studied macroeconomics for 30+ years.

Raise your hand if you have access to the most in depth and up to date financial data possible.

Raise your hand if you spend 10+ hours per day studying all of this data.

I guess its just fun to ***** about stuff like this when you arent the one that actually has responsiblity (not singling out zoony in particular, just a general observation)

[jbooma]

Im sorry, but what reeks of arrogance is Joes on the internets thinking they know better than the Fed.

Raise your hand if you have a PhD in Economics from MIT.

Raise your hand if you have studied macroeconomics for 30+ years.

Raise your hand if you have access to the most in depth and up to date financial data possible.

Raise your hand if you spend 10+ hours per day studying all of this data.

I guess its just fun to ***** about stuff like this when you arent the one that actually has responsiblity (not singling out zoony in particular, just a general observation)

To add to this I hate it when people who only learn by what the hear or read try and tell someone who has done it for 20+ years how it should be done etc...

Whatever happened to respecting those who do it for a living, and not thinking we know everything??

[ImmortalDragon]

To add to this I hate it when people who only learn by what the hear or read try and tell someone who has done it for 20+ years how it should be done etc...

Whatever happened to respecting those who do it for a living, and not thinking we know everything??

What happened to truth as authority and not authority as truth?

[isle-hawg]

Im sorry, but what reeks of arrogance is Joes on the internets thinking they know better than the Fed.

I guess its just fun to ***** about stuff like this when you arent the one that actually has responsiblity (not singling out zoony in particular, just a general observation)

You realize this is a message board here right and that is what we do.

To add to this I hate it when people who only learn by what the hear or read try and tell someone who has done it for 20+ years how it should be done etc...

See comments above..

Whatever happened to respecting those who do it for a living, and not thinking we know everything??

You lost me on this point. I do NOT have a PHD in economics but don't think I need one to realize that for the govt to just keep printing money to pay the bills is a bad thing, nor do I think that watching as the US dollar is now worth less than the Canadian dollar and Euro is not a good thing either. So perhaps just maybe the elected and appointed professionals don't know everything?

[Ancalagon the Black]

Im sorry, but what reeks of arrogance is Joes on the internets thinking they know better than the Fed.

Raise your hand if you have a PhD in Economics from MIT.

Raise your hand if you have studied macroeconomics for 30+ years.

Raise your hand if you have access to the most in depth and up to date financial data possible.

Raise your hand if you spend 10+ hours per day studying all of this data.

I guess its just fun to ***** about stuff like this when you arent the one that actually has responsiblity (not singling out zoony in particular, just a general observation)

OK, I expect you not to post anything at all critical of any decision the Redskins' players or staff makes. Ever.

What the Fed is doing will benefit some people and hurt others. Anyone can see that. If you're benefitted, you're happy. If you're hurt, you're unhappy.

[jbooma]

You lost me on this point. I do NOT have a PHD in economics but don't think I need one to realize that for the govt to just keep printing money to pay the bills is a bad thing, nor do I think that watching as the US dollar is now worth less than the Canadian dollar and Euro is not a good thing either. So perhaps just maybe the elected and appointed professionals don't know everything?

No one knows everything but I would tend to go with economists more often then job blow on the computer he feels is all knowing

The fact the dollar is low is because of a lot of different factors. Before people jump and scream what is going on also look what happens when it is the case. Right now eurpean tourism is HUGE in parts of the US because now they can afford to come here, which was not the case years ago.

Yes the dollar is weak but that does not mean it is the end of the US, no so many other countries have surived with having a weak currency.

The US has been in a long transition of going from an industrial economy to a service economy and that is what we are seeing before our own eyes.

[SnyderShrugged]

No one knows everything but I would tend to go with economists more often then job blow on the computer he feels is all knowing

The fact the dollar is low is because of a lot of different factors. Before people jump and scream what is going on also look what happens when it is the case. Right now eurpean tourism is HUGE in parts of the US because now they can afford to come here, which was not the case years ago.

Yes the dollar is weak but that does not mean it is the end of the US, no so many other countries have surived with having a weak currency.

The US has been in a long transition of going from an industrial economy to a service economy and that is what we are seeing before our own eyes.

so if an esteemed economist like Greenspan or Walter Williams said there was potential for a big problem you would have to listen then, right?

[Larry]

Whatever happened to respecting those who do it for a living, and not thinking we know everything??

A lifetime of being told "Trust the Government, we know what we're doing"?

[Ancalagon the Black]

No one knows everything but I would tend to go with economists more often then job blow on the computer he feels is all knowing

The problem with your reasoning is that economists disagree vastly on this issue. The Fed board is appointed by the president and confirmed by the senate. They are human, just like you and me.

[Destino]

Mmm Cake... it's not just for polls anymore!

[zoony]

Im sorry, but what reeks of arrogance is Joes on the internets thinking they know better than the Fed.

Raise your hand if you have a PhD in Economics from MIT.

Raise your hand if you have studied macroeconomics for 30+ years.

Raise your hand if you have access to the most in depth and up to date financial data possible.

Raise your hand if you spend 10+ hours per day studying all of this data.

I guess its just fun to ***** about stuff like this when you arent the one that actually has responsiblity (not singling out zoony in particular, just a general observation)

Well I'm sorry to have an opinion on the whole thing

[88Comrade2000]

Recession; this country is on the verge a depression. The dollar is on the verge of collasping completely!

However the next president is; will have to deal with the worst economic time since the great depression!