during the Clinton administration Greenspan and Clnton met once a month. The Bush / Cheney administration met with Greenspan 4 times a month. Is anyone foolish to think the current administration hasn’t influence the Fed and created the economic mess America is in now? I can’t believe America has to deal with this moron (George Bush) for another year. See you on the bread line.
There can be no question that the FED is indeed catering wholly to Wall Street, and Ben is being bullied like a younger brother. With every major move down has come a major interest rate cut, with the last “emergency” cut coming on the heels of a 1,500 point dive.
Wall Street has now priced-in a near 90% chance for a 50bps cut, so do you think Ben has the guts not to comply? Sadly, I don’t think so. His actions clearly illustrate that the stock market, not the economy, drives his decision-making. He knows the market will sell off if he doesn’t comply with Wall Street’s wishes, so another unnecessary cut will be handed to Wall Street on a silver platter.
An interest rate cut today would be totally unjustified. Recessions are a necessary part of economic growth, and over-reacting will do nothing but cause a whip-saw effect in the economy, which will cause even greater issues in the future.
While Ben is catering to the wealth of Wall Street, fixed-income individuals are being ravaged by lower incomes and raging inflation. Of course, there is no inflation, unless you need to drive, eat, or keep your lights on at home.
Ben will hand Wall Street what they are asking for, and strip the wealth of all those but a select few, while the economy still works through a recession. Another cut will only serve to extend the recession.
Personal Message for Mr. Ben..Ok. I’m retired..with sufficient funds in the bank to live for 10 or 15 more years. NOw that you have cut interest rates down so much I’m, going to tklae all my money out of the bank and buy silver and gold which I think will always be legal tender. The bank will no longer be able to lend my money for any reason to anybody. And if th ere are enough folks like me there may be some banks that will close their doors.
Thats probaably what you want to see….small town banks closing up o alla the big boys in New York get the gravy. You.ve delivered the fatal blow to millions of retirees like me….watch is bleed.
I strongly agree with the author. The Fed is being pushed around.
I was very sceptic of Mr. Bernanke right from the start, and my biggest fears came true. It is unbelievable that a few people on Wall Street can influence interest rate decisions. But not only Bernanke is to blame. Almost all interest rate decisions were unanimous. As a Ph.D. Candidate in economics, it is shocking to see on what facts the Fed bases its decision on. We do need Greenspan back.
I’m all for it, keep lowering rates, a weaker dollar also helps our economy since goods and services here in America (and any exported) will be cheaper than imports/local country goods. The people that are mad are the internatinal businesses, not the American public. Go FED drop the rates some more. I bought gold about 2 years ago, and that hasn’t been my best investment since then, metal stocks like CLF and RIO were!
Holy crap. Learn how to spell, everyone. Please.
And I think Ben is stuck on this one. The market wasn’t just losing money after MLK… it was crashing BADLY. It was an “emergency” rate cut. Did Wall Street have it coming with its multi-trillion dollar debt-based holdings and derivatives? Sure! Did the average holders of 401Ks? Nope! Do the average holders of savings accounts and CDs? Nope, again. Ergo, a rock and a hard place with how to proceed on Fed rates for ANY group of Americans.
I agree, of course, that this loose-money policy will just lead to more inflation and dollar devaluation, but that’s the trend of our fat, indebted nation, so why does anyone expect that to go away?
Monetary and fiscal policy has to be changed AT ROOT before the negative effects will disappear.
What you’re all asking for is to have your particular form of nest egg be “poisoned just a little bit slower, instead of all at once.” Great for you old folks who are gonna kick it in 10 years, but sucks for us 24 year olds who have to live with the crap!
Yes, the primary mission of the Fed should be to fight inflation and maintain stability of the dollar ,,,,, not to appease the equity markets
I don’t think the FED is being bullied by the market.
The FED is trying to cover their own butt. They held rates too high, too long. They didn’t have any understanding of the financial derivitives related to mortgages. They didn’t know they whole mess was going to collaspe.
Now we are faced with a possible recession in the general economy and a depression in real estate and housing in an election year. Not real popular. Bet their phones ring.
Their concern is not the stock market…it’s the economy.
This article is interesting. It gives a different flavor to the situation at hand.
Still, it was the FOMC’s lack of purpose and initiative in bringing about a soft landing that caused the emergency rate cut last week. So who is at fault? The Fed’s hands are tied now to pleasing Wall Street because the economy is as bad as it sounds. Read every day in the business world and most companies took a hit.
This housing bust is worse than the stock market bust in 2000 in that more people own a home than people who invest in the Tech stock market. The housing situation held up during the Stock market crash and continued to rally due to low interest rates. In addition, consumer spending continued due to easy credit. People feel wealthy, and that drives the economy. Now, people who own a home is affected, homes prices dropped, lending restrictions are much tighter, people feel the credit crunch, the economy took a semi-hard landing…
The general consensus, or so it appears by the American people, is that the FOMC did not do enough. Now the Fed is doing whatever they can to rectify it, including an emergency rate cut. If the hoped for 50 basis point reduction does not happen tomorrow, it will bring confusion to Wall Street again.
“The needs of the many outweigh the needs of one”… If Bernanke takes this personal as the author of the article implies, 2007’s downturn will continue well into 2008.
In my humble opinion…
the fed did not lower rates to bail out the stockmarket
the fed cut rates because of the dire situation with the muni bond insurers
if they go bust and the 2.4 billion they insure gets downgraded its really gonna be showtime out there
the fed is way behind the curve
they spent most of 2007 saying the subprime was contained
The Fed should not be making more rate cuts to fuel the supposed economy out of a recession. The 1 thing I remember from Economics 101 when I was in college was that the more rate cuts you have, the lower the interest rates go down, the lower the value of the american dollar goes and the price of everything inported from overseas goes up and the cost of our stuff goes down, but in turn we have a major shift in production on our side but we dont see a return on fuel prices ever going back down. Gas is not selling at $3.00 a gallon because of higher demand from China or the US but it is selling higher because it is valued by the american dollar as well, so when the dollars value plummets and sinks like a rock in water, than the price of oil goes up and so does our fuel cost.
I think if we had a smart person running the fed and a smarter president like Reagen was, than we would want higher interest rates so that people dont put all their money into the stock market and make it over valued to who ever wants to buy into it.
If rates were back to where they were at in the 80’s than we would have people living inhomes they could actually afford and we wouldnt have the stock market so over valued, we would have people willing to leave their money in a bank to make better money off of that than moving everything they have over to the stock market in hopes of getting that 10% return on their money.
Simple economis 101 I said, why can the fed not figure this one out for themselves. they have done nothing but hurt the USA dollar by dropping rates so low, but of course lets look at what everyone wants rates low for. New car loans and home loans being so low lets do it push it further down and let me put my money somewhere else.
Why do they call him “helicopter Ben”, and what would have Alan Greenspan done if he were in this position?
Of course the Fed is bowing to the market, but they have no choice. The market has over reacted the the credit crisis so much that it is feeding off of itself. Just as the increase in housing prices was a self fullfilling prophecy, so is the decline. They went up so fast because anyone could get a loan, so everyone did because they wanted to strike it rich in real estate. Now even deserving borrowers are being shown the door, which helps to further reduce the already low demand which in turn puts more downward pressure on prices. This is basic economics. The Fed is doing the only thing they can which is lower rates to try to get more people back into the market. Many view this as a bailout of the Banks. This may very well be, but what is our other choice. This same scenario happened in the late 80’s after that housing bubble, the fed kept the rates high, and we taxpayers were forced to bailout the banks with the creation of the RTC.
What can be done is for congress to stop bickering and pass some of the mortgage bills through ASAP. If we let Fannie Mae and Freddie Mac buy loans above $417000 this will be the equivilant of lowering the interest rates for these well quailified borrowers by as much as 1% without any monetary policy. Similarly, increase FHA’s limit, and make it easier for brokers to become FHA approved. The main reason borrowers were not put into fixed FHA loans in the past is because their brokers were not able to originate these loans. No broker is going to tell his customer to go somewhere else to get their loan, instead they did what they could to get the loan closed and that usually was a subprime adjustable loan.
Finally the Fed needs to completely re-think how they calculate inflation. They are completely ignoring housing prices in their computation. This is what prolonged their expansive policies. They continue to use only rent costs. Well from 2002 to 2005 everyone with a pulse was buying a home instead of renting. This was depressing the number of renters, and holding rent increases down. Now with no one able to get loans, the number of renters is going back up and will continue to drive up rent cost, making it appear there is inflation in housing! A better barometer needs to include the wealth affect of housing increases. For a vast majority of Americans their home is their largest asset. If the value goes up they feel rich and spend. Now the value is going down so we feel poor and don’t spend regardless of what interest rates are.
Yet another take on why it is crucial to save banking and insurance industry even at the expense of consumer, whose spending is a crucial excuse for such interset rate cuts and stimulus plan.
Well it seems like no one has appetite for this sort of thing since, the underlying causes are too murky to even mention.
Our dear Jim Cramer has promised he will definitely spend an episode to enlighten us on this topic.
Raman has it right. The rest of the people who think Bernanke has been bullied by Wall Street or pandering to the rich is incorrect.
Does lowering the rate help Wall Street? It is hard to say, since the effects will not bee seen for a while. I can tell you that the Real Estate Market has seen some improvement since November (at least in my area) and they are partly due to the interest rates.
The economy is global and the dollar has been week for at least two years. Read Mr. Richard W. Fisher (Federal Reserve Bank in Dallas) about Money and the Global Economy (http://dallasfed.org/news/speeches/fisher/2008/fs080117.cfm)
and it should give you some idea that the economy is no longer local.
Walmart, K-Mart, Costco, Dell, IBM, Ford, Chevrolet, GM, McDonald’s, Burger King, Old Navy, The Gap, American Eagle and a million more other retailers purchase their merchandise abroad.
Even Levis (which still has a plant in San Antonio, TX) no longer makes its own textile. Plants in India and China purchase the US Cotton and make just about any textile you wear today. Did Mr. Greenspan or Bernanke made the current global economy?
No.
Thanks to Unions and the U.S. Government our factories can no longer compete in the World market. We may hate France and the French but we are headed towards the same. The only thing the French make that is exported is Wine, Weapons and Electricity. Sure they export other goods (cars, clothes, cigarettes, etc) but not in great quantities.
India is the Number One producer of Textiles in the world. Just ten years ago India was only known for its Silk, now they make any textile you like. It is not because their textiles are the best but because they are the cheapest since their labor is basically indentured slave labor. I know I have met these people. The computer I am typing this message on is a Dell and it was ‘assembled in Texas’ but it was made in China. Every component (LCD, Hard Drive, Motherboard, Memory, CD Player, etc) were made in China. The days in which China was thought of cheap products (I remember them) and made little plastic toys have long been gone.
Vietnam has the largest after market (Not OEM) auto-parts industry in the world. They make Fenders, Hoods and trunk lids for Mercedes, BMW, Honda, Acura, Ford, Chevy, SAAB, Lexus, etc. They also started making Alternators, Fuel pumps, Bearings and more.
This country complains about the gas prices and the interest rates. Gas in any of these countries is three times as expensive as it is in the U.S. and if you try and get a loan there a 10% interest rate would be a very nice interest rate.
What these countries have is cheap labor and governments that support their factories (IE no taxes or little taxes).
You want to stimulate Wall Street and the Economy? Take away the taxes for all the working Joes that produce a product in this country and allow the Factories to pay them full Healthcare instead of paying FICA and Social Security for their employees.
Oh! I forgot that Congress, the Senate and the White House are ran by folks that earn their paycheck thanks to our taxes. They also do not pay FICA or Social Security taxes either and they all get a nice retirement check after they serve one term.
Writing a check to the American public is a band aid but lowering interest rates is part of the game played not only in this country but around the world. You want to help the economy and Wall Street then buy goods made in the U.S.
Drive a Ford or Chevy (even though most of their parts are made overseas) wear Dickies and Nike. Go out to eat once a week at a local restaurant and buy food that was grown in the U.S. and buy an Apple computer.
I’m for lower rates because as a small businessman it lowers my borrowing costs which increases my profits which increases my options such as reinvestment and expansion, higher wages, bonuses, etc. Lower interest rates equal faster equity-principal build-up which establish more collateral to borrow more or additional funds in the future to continue growth and expansion. Low rates the last few years were instrumental in positioning my company for growth from 12 employees to 42 and still growing now.
Bernanke is a follower not a leader. You can look at his decessions and see that they are made out of fear not forthought. There is a bright side though. With the rate cuts we as consumers, if we are smart, have an oppertunity to turn our mortgage debt into low cost 5.5 to 5.75 long term money and cleam up our personal ballance sheets. we should all take advantage of this because in long term real-estate will appreciate and it will increase our net worth and reduce our cost of living.
Politics and economics have never mixed well. Injecting borrowed money into the system is like giving a junkie more drug; it may feel good initially, but it won’t address the fundamental issue. My vote can’t be bought on borrowed money!
In response to an ever increasing reaction to stock value variation the Fed is taking dangerous action.
Because of low interest rates the last few years, the difference between Wall Street and Main Street is getting blur since Citizen and pension fund over-invest in the stock market, because they cannot get decent return on their money in the bank.
Cutting rate again will move to much saving in the stock market, and provoke an overvalued market ready to fall severely (crash).
Paul of Colorado writes: “You have GOT to be kidding! The Fed is NOT being pushed around by the markets. Last week, the U.S. stock market was just hours away from probably posting the biggest one day loss EVER! Do you have any idea what that would have done to the psyche of the American, or even world, consumer?”
Nothing because 1: the market is NOT the economy, 2: even if a massive loss occurred… rest assured, there would’ve been a buying spree the next day or coming days – armageddon it is not and 3: most Americans psyche won’t be affected because they’re busy watching Access Hollywood.
“It would have caused a much larger pullback in consumer spending than was seen after the 9/11 attacks! After 9/11, most large retailers saw their sales decline by 33% overnight and stay that way for two months!”
Compare to 9/11?? That’s because thousands of innocent people died by an act no one could see coming… people naturally stayed at home in fear. You just can’t compare.
“Bernanke was not pandering to markets and Wall Street. He effectively and expertly staved off a cataclysmic financial event!”
“Cataclysmic”? Hardly. This kind of over reaction is root of many problems in the US these last 10 years. Everyone is constantly anxious and everyone wants instant gratification. We are no longer willing to wait it out. Everything needs to be INSTANT, INSTANT, INSTANT.
“Inflation is only present in energy and food. All other prices are falling fast – from rent, to homes, to TVs, to washing machines, to computers, and to clothing with all the 70%-off sales! Deflation is the problem and the Fed needs to act agressively to resolve it.”
“Only” energy and food?? Sorry, but a plasma tv is not my idea of what’s important for survival. Somehow I think food is right up there (and a Starbuck’s coffee $1 or not is not one of them). But hey, these last 10 years, for many people you would think that a new tv, clothes and other non essential goods were a means of survival.
People are about to find out what matters more in life and it ain’t HDTV. Retailers already got a taste of this over Christmas. Consumers essentialy said ‘thanks but no thanks’ regardless of the discount.
Yes, I agree. The Fed needs to MAN UP!
I agree. Ben & Co. are in place to appease Wall Street’s appetite for rate cuts. Soon enough, the discount rate will be down to zero. What will powerless Big Ben do then? The U.S. is in debt (and piling on more with rebates). Who’s going to pay this back with our eroding $US…my guess Gen X and beyond. Thanks B-Boomers!
I live and work in the EU.
I believe the Fed is doing way to much to support the banking industry.
Each rate cut does nothing more than dilute the value of the dollar.
And who pays in the end?
The american public.
Buy gold and silver while you can!
Yes, yes, yes! Absolutely! I think the Fed is supporting the wall street and big banks at the expense of average Americans. Heating oil, gas, and food prices are soaring up, fundamentally because the value of dollar is falling. Dollar is falling because the Fed has been printing too much money, diluting its value. The overvalued housing prices will go down, and many people will have to foreclose, no matter what the government does. It is better even for the people who are losing homes, to face the inevitable reality, and start new, even if it is painful, rather than dragging things on for many many years, spreading the misery to the entire economy and to everybody, and risking the global economic status of the US and the status of dollar as major currency irreversibly. What the government/congress/the Fed are doing right now is a complete and sad failure of leadership!
And here is a take on Milking the consumer and markets
Bernanke and Market heavyweights have recomended that interest rates be lowered, because core inflation rate is stable.
Well these heavyweights and Bernanke have not been to Walmart in maybe 10 years because:
a). Price of 1 gal. of milk in 1997-2000 was 99 cents and now it is $3.50
b). Price of 1 gal. of car fuel was 96 cents and now it is $2.67 in Texas.
Prices of consumer essentials have gone up four time during past eight years.
Compare that to a CD earnings 5% interest (normally 4%), if you deposited $1000 in a bank in 2001, you would still have to wait another presidential term till end of 2012, for your returns to double to $2000.
Temporary band aids like the Fed rate cut and the “stimulus” package are only making the problem worse. When too cheap credit caused the problem in the first place, making it even cheaper is going to fix the problem?
Wall Street or Dumbo Lane as us common folks as grown to think of it, is like a Junkie; it keeps asking their pimp for another fix and unless they get to rehap at some point you end up at the funeral. It is obvious that Wall Street controls the Fed’s actions and continues to practice their master of the universe ways because the consequences are not what they should be. So much for the free market; I guess the Fed is going to rate cut for Wall Street until money is free. Then what? Just forgive bad debt and set up another bailout fund? This practice just continues to move financial markets away from any sound fundamental practices and keeps it business as usual for the people that have made massive bad judgements so far. Welcome to Bernanke’s Wall St club and he wild wild west show. Let’s make sure the boys on Wall St. get their bonuses and can continue to go into battle will all the air cover that Bernanke can provide.
Here is a take on interest rates being lowered by Fed.
Businesses and individuals borrow more when Fed interest rate goes down. Not that individuals or business’s income rises. Other factor is jobs are constantly going abroad further eroding businesses and individual ability to earn.
Individuals and businesses get a temporary relief from paying high interest rates. The underlying issue still remains and that is businesses and individuals still do not have enough income to pay off their previous debt.
Feds lower interest rates shields people who borrowed mostly for speculative investments in the first place.
So this money cycle continues: lower interest rates that increase the asset value temporarily. Smart money and CEOs and executives get enough time to milk the market (Funny how Steve Ballmer of Microsoft always talks about milking the market and consumer), leaving the consumer again squeezed for cash. And fed goes out again to repeat this cycle.
Since 1974, 2007 has seen first simultaneous decline in U.S. household wealth and income since 1974, thanks to Bush administration’s economic policies.
The best part of last night’s annual State of the Union was, when President Bush mentioned ‘Buy US made products’, except for one audience as seen on TV, none of the Senators or Congressmen rose for an applaud. That goes to show how much pride our leaders have in American products and that your Senators and Congressmen have been bought by foreign interest lobbyists.
One simple question, why was it Alan Greenspan was so cautious to battle inflation? So much for the importance of keeping the cost of goods down so the middle class and lower can actually afford to live, and continue to drive the economy foward. The Fed’s decision to continously cut rates has done nothing but appease the fat cats on Wall Street and foreigh investors. However, the rate cut has worked for a matter of weeks before they start to cry for more cuts. All this has done is delayed the naturally correction of the impending recession, and has pretty much has guarantee one, and probably has increased its intensity. There is no way the Fed will be able to control inflation in the near term. The current market would have a heart attack should it incur a rate increase. Worse of all because of the continued free fall of rates and soaring inflation, the economic stimulus package is going to have an impact for the quarter the majority of it is spent, and then what? What is the Fed’s course of actions when then get 0 Basis points and cannot cut rates anymore, and inflation is out of control? The rate the Fed is on we will find out at the latest by mid 2009.
The Fed is absolutely abandoning main street in favor of wall street. Increasingly, corporations and big money interests are calling the shots in this country. The rate cuts will stimulate wall street via the infusion of liquidity. The wall st. party will continue for awhile yet. Unfortunately, main st. suffers through massive inflation and the erosion of the value of our assets. Meanwhile, the fed and talking heads distort the facts, hype the message, and tell us not to worry…just a little bump in the road…spend…consume…pay no attention to the man behind the curtain.
As I understand it, the “crisis” has two parts – 1) real problems in housing loans, which are causing real problems at the banks, and 2) a liquidity crisis that is resulting from these losses and the loss of confidence among the banks.
I think the FED is working on the second issue (ensuring adequate liquidity). This will not save any banks or save any homeowner who can not pay his mortgage right now. My hope is that this keeps the problem where it belongs – with the banks. I don’t think they will be (or are being) rewarded for their poor lending practices, but the rest of us are being insulated a bit from the consequences. I think that’s a good move.
Maybe the aggressive rate cuts meant to send us a signal that we should not be declaring a recession for this stupid reason (poor banking practices) while the base economy is still relatively solid – to say nothing of the rest of the world where the economic growth is still pretty good. It would not surprise me if the FED got back into the inflation-fighting mode very soon after they feel that the liquidity crisis is a bit further behind us.
Bring on the rate cuts – the more he better. The economy is very weak and we are battling a financial crises. In fact, the US freight economy has been in a recession for nearly two years. Commodity prices are high but wage inflation remains tame and that’s the more important factor.
Of course the Fed is being bullied by the markets….isn’t it obvious!
This latest fall in the markets is really just start…there is much worse to come.
The confidence in Greenspan’s power to defeat the cyclical nature of markets brought us to the worst situation since 1929. And Bernanke is no Greenspan. No one trusts anymore those hanky panky maneuvers. The dollar goes down and the economy is facing disaster. Only a little later.
Let see, my kids ask my bad money management spouse to borrow some money for some crazy party. Later on they got into trouble and ask my help to bail them out. Now as a supposedly good parent should I bail ‘em out and let them do the same mistake again, or should I let them stay over in the free hotel so they can learn their lesson?
Great article, you’re right on. Fortune had a similar article:
http://money.cnn.com/2008/01/22/news/economy/cureupdate.fortune/index.htm?postversion=2008012211
As much as I want to see another rate cut to help my portfolio in the short run, I’m afriad that the long term impact to my portfolio (in USD) will be worse.
I retired from the Chicago Merc and CBOT where I was a trader for 27 years. Lowering of the interest rates as well as the financial stimulus package is a band aid. Lets face it…the average American will use the $800 to $1,200 he/she gets to pay bills. That does not fix the problem. The Fed needs to let the dollar gain its own value back on its own time, this will happen when confidence builds back into the U.S. economy. The Fed should also let the stocks correct themselves as was the case before Monday. The Fed should let the financial institutions, who made bad loans, deal with that as I would if I loaned my next door neighbor a hundred thousand dollars and he was unemployed. There is no investor confidence in the market, although there is in some stocks, and the majority of the trades being done now are electronic trades by hedge funds, NOT THE BANKS THAT MADE BAD LOAN DECISIONS. Foreign investors were selling stocks in American companies for a reason, and its not because of the interest rate. They were liquidating there positions because the value of the dollar is going down and many companies are reporting heavy losses because of bad business decisions… There has been a slow down in the economy hence you cannot to continue to produce 40,000 widgets a year if people are only buying 5,000, and if you look at the rules of supply and demand, if you have too much inventory, you cut production, because demand is low, which means also cutting some jobs. You sell your excess inventory cheaper, so your not holding onto it, and wait until the demand builds back up. What people need to do is follow the advice, both good and bad, of guys like Warren Buffett and any other millionaire over the age of 65. They will ALL tell you the same thing… This is a band-aid and the Fed should stop being a puppet on a string for a bunch of hedge fund managers and let the markets fix themselves and bring back confidence back into the American economy.
The FED is actually doing what it is supposed to, what it HAS been doing all along, that is to destroy the dollar and set the economy up for a fall, also to have American’s saving disappear in inflation, take the incentive away from the savers by keeping intrest rates low
i think it is ridiculous that the Fed is getting carried away by Wallstreet.What is the back ground in cutting the interest rate, when the economy is weakining. Fed need to protect the common investores, not the big corporates or investores. Fed goes on cutting the interest, the common person who saves in banks will withdraw the money and invest in stocks. Once the economy goes to recession , the stock market will collaspse and it may be in next 6 months. Then the poor investor will lose his money.
Hai fellow americans,
Please don;t put any money in stocks now, even if Fed makes the interest rate zero. You will be loser at the end. If you leave the money in bank, at least you will have your prinicple amount safe
I keep reading that the low interest rates are what got us into this mortgage mess. However, this is simply NOT TRUE. The interest rates weren’t the problem, it was the financial sector’s inability (or unwillingness) to lend responsibly that caused this problem. Were the interest rates a big factor in the real estate boom (and the bubble that followed it)? Yes, but the responsibility for the mortgage problem rests COMPLETELY on the financial sector and the borrowers, not the Fed.
I say let the real estate market crash and burn. This will allow home prices to come down to realistic amounts. Even though house values went up during the real estate boom, wages stayed the same. As a result current home prices are out of reach of the average American and those who purchased homes during the real estate boom are in houses they can’t afford to keep.
I happen to believe that Bernanke (aka The FED) is/are NOT being bullied by the Markets. However, The FED has been placed in a lose-lose situation and if they are being bullied, it’s by our own Government in the form of a NO ACTION Congress & Paulson. IF Bernanke doesn’t lower interest rates (and I don’t think The FED should lower rates) he’ll become the “scape goat” and be blamed for the mess we’re in.
Greenspan started this problem by lowering interest rates too low for too long, much like the scenario that Japan has gone through.
Just look back at Japan’s history of low to zero interest rates for the last 10 years and what that has done for them. Currently Japan can not afford to raise their interest rates out of fear… even though they’ve tried for the past 3 years.
I sincerely hope Bernanke (aka The FED) will hold their ground and force Congress to act. If we slide into a recession, so be it – let’s take it on the chin and get it behind us.
This is definitely not a good occasion to cut interest rate as what Ben’s predecessor did. This would only worsen the market, which is already in a messy state for the long term.
You have GOT to be kidding! The Fed is NOT being pushed around by the markets. Last week, the U.S. stock market was just hours away from probably posting the biggest one day loss EVER! Do you have any idea what that would have done to the psyche of the American, or even world, consumer?
It would have caused a much larger pullback in consumer spending than was seen after the 9/11 attacks! After 9/11, most large retailers saw their sales decline by 33% overnight and stay that way for two months! Do you honestly think our retail economy can handle that right now? Do you think our banking system is strong enough right now to handle that kind of shock? Are you really that interested in sending companies like Countrywide, Ambac, MBIA, Citigroup, Washington Mutual, and dozens upon dozens of other banks and homebuilders into bankruptcy, not to mention the millions of layoffs that would be incurred by retailers?
Bernanke was not pandering to markets and Wall Street. He effectively and expertly staved off a cataclysmic financial event! I agree he has made mistakes. But he was right on with this cut. He now needs to follow up with one more, and strong a statement that he will do whatever it takes to support continued growth in the U.S. economy – one of the Fed’s mandates!
Inflation is only present in energy and food. All other prices are falling fast – from rent, to homes, to TVs, to washing machines, to computers, and to clothing with all the 70%-off sales! Deflation is the problem and the Fed needs to act agressively to resolve it.
The Fed should not lower rates. Those that were reckless in the finance arena should not be rewarded!
It’s not about if the markets are bullying the FED or not. It’s if the FED wants to save this country’s banking system. Billions if not trillions of bad loans threaten to take it out. Insurer’s of these loans are getting hit hard because of it. Banks needs to be able to build their cash reserves and the only way to do it right now is through rate cuts. If they don’t get these cuts (and if someone doesn’t bail out the insurer’s) we’ll be looking at a complete implosion of our financial system.
It’s not about saving the markets. It’s about waking up tomorrow and knowing your bank where your savings is at is still in busines because if it isn’t, good luck trying to pay your bills in red paper clips.
We need a Federal Reserve Chairman who knows, really knows how to manage monery policy instead of being told how to do it by both Wall Street and Special Interest, Please let’s look at the future generations of American’s.
As at least one soul in this thread commented, the economy is naturally a cyclical phenomenom. Trying to artificially avoid the nadir of these cycles negates the laws of thermodynamics and is tantamount to an astronomer trying to create eternal spring by altering the earth’s orbit around the sun, or by a physician trying to eliminate all living creatures’ need of sleep so they can be productive 24/7.
It doesn’t take a rocket scientist to see that what your “enlightened” economists and politicians are no different from Middle Age alchemists who are intent in creating a perpetual motion engine or finding the source of eternal youth and life!
Not much to add to the majority of other posts. They rightly see yet another government entity as being a proxy for the wealthy. America certainly has been subterfuged by the Republicans; it’s government hijacked to constantly increase the wealth of the top 10% (regardless of the consequence).
Fellows Americans, this coming election…please DO vote for democrats, libertarians (Ron Paul?) Mickey Mouse….but most definitely NOT for any mainstream Republican.
Mr. Bernanke is not being bullied by the market. He is being accommodative and prudent. It is a good idea for the Fed to lower Rates. Lower rates will mitigate any potential payment shock that consumers have recently experienced. After all with libor and prime being so low adjustable rate payments are much more affordable.
I think it’s not the Fed we need, but the Fed’s – one rogue in France loses 8 billion and he’s in deep trouble. Fair enough. The whole of wall street loses hundreds of billions and no-one is in handcuffs?? No-one??
Too much focus on interest rates and not enough focus on conviction rates!
Can someone come up with a plan where interest rates will be cut on loans, but not on CD’s and IRA’s? That would be a sure political winner–something for everybody.
Wow, all you people here are real morons! The FED ABSOLUTELY HAD TO LOWER RATES. Remember one thing all you self hating idiots, the economy is run by housing and people’s access to loans and re-fi’s-this is 75% of the economy. I agree with you that Sub-Prime was out of control, but no one’s saying to drop the Fed rate back to 1%?? ALso, may I point out to you “to hell and burn the sub-prime borrowers” there wouldn’t be a “sub prime crisi” if there wasn’t a housing crisis, and yes, there wouldn’t be a housing crisis if the FED would have lowered rates 12 mos ago! It’s not just the write-downs from sub prime that’s spilling over, it’s a weak and battered housing market that’s hurting us. 37 countries are in a Bear market-what would that do for your 401K’s if the DOW dropped another 2000 pts? Remember you dummies, we’re all in this together, if one sector fails we all fail-and we all get hurt in the end. So BRAVO FED! Thanks for coming to our aid and I hope to continue with another 50 basis pt cut.
It is a stupid article by someone who does not understand elementary macroeconomics. Most of the “comments” have been roughly in the same vein, i.e., knee jerk ignorance.
Some of the people forthrightly admitted that they are selfishly interested (lower interest rates on CDs mean that people rolling over short term CDs dont make as much $) well surprise! fixed rate investments aren’t as safe as the load fund people say they are. they carry a variety of risks too numerous for me to go into.
it is pretty easy to see that some of the comments are from short sellers too. they always want bad things happen to people who work for a living.
well guess what? i work for a living and dont want to lose my job. i have a good mortgage and good credit and have no responsibility for somebody’s sub-prime loan or any of the people that packaged the things and sold them to idiots like your bankers.
consumption by people like me accounts for 67% of the world’s largest economy. Do you really want to see me go broke along with the sub-primers just because you think they pulled a fast one?
Presumeably, you are all selling something too. Where will you be if nobody can buy it from you?
So the real trouble is just that, if the US economy tanks, it could take the world economy with it just like it did in the 1930s. (some short sellers got rich then too and cash in the mattress was king. John Dillinger became a folk hero for robbing banks that were foreclosing “sub-prime” mortgages of the day.)
And it all happened, if you believe Milton Friedmann, which I do, because the Fed believed in the crude quantity theory of money: times are now hard and people are doing less business and spending less money so let’s not print any money because there is nothing to spend it on and it would only cause inflation. (duh! well I suppose it had a certain homey sound to it at the time and people seem to be thinking the same dumb thoughts again.)
So the Fed not only refused to lower rates, it raised them. This deepened the recession touched off by the stock market crash of 1929 and caused it to last for 10 years. Is that a great depression? (Friedmann says we had an even worse one from the late 1860s thru the late 1890s because at that time money was gold and there were no discoveries of gold after the California fields played out until the late 1890s when gold was struck in the Yukon, Alaska and South Africa.)
the resulting lack of demand for goods and services caused by the Fed’s decision in the early 1930s to contract rather than expand the money supply touched off the great depression of the 1930s worldwide.
the depression in turn made the losers of WWI turn to violent solutions that created WWII.
Well, you short sellers and CD rollers should love WWIII. Think of all the $ you will have to spend when you are nuclear toast!
Accomodative monetary policy isnt much, but there isnt much else constructive that can be done at this point.
I would like to see the big shots at the investment banks go to jail, but from what I hear, that isnt going to happen.
The national debt is 9 trillion. All debt combined (individuals, etc.), I have heard or read numbers from 20 trillion to 70 trillion. This is what happens when you have a quasi-private bank (the fed) controlling a tyranical government. Fed and Wall street are one and the same, so they are just helping themselves out. Does this surprise anybody? I am actually very surprised that the dollar hasn’t collapsed yet. It certainly should, our balance sheet is nothing less than atrocious.
The consumer price index that measure inflation that our wonderful government produces, is a complete and total joke. Inflation is out of control. Why do you think commodities are so expensive?
All we are doing by cutting interest rates and injecting this stimulus package into the economy is increasing the debt and devaluing the dollar. It’s all smoke and mirrors, it makes us feel better but the dollar bubble will eventually burst.
Vote RON PAUL and get rid of the federal reserve.
With housing prices declining in many areas of the country, I am curious why inflation seems to be the concern rather than deflation. Deflation is a much more serious threat to the economy that moderate inflation. If there’s a recession in the near future, the Fed caused it by increasing rates over the last several quarters. What they are doing now is probably too little, too late.
Sure could use Alan Greenspans steady hand on the tiller right now. He instilled confidence in the Fed. Res. when he was in control. Actually, it weakens confidence with a lot of investors when the Fed. has kneejerk reactions to market ups & downs. Let’s look at the long term solutions.
Of course Fed is being pushed by Walstreet and stock markets etc. Didn’t you see when the market futures indicating 500+ poins lower the same morning they called emergency meeting.
Imagine if they didn’t cut rates of .75%. Probably Ben would have received much criticism. Fed just can’t avoid the pressure being pushed!!
To make it simple, inflation numbers are suppressed or not measured properly. As long as cheap goods flow from china and like US will enjoy for some time. The Fed can delay the doom for some more time……So be ready for a big one…
I think the interest rates will help inject some needed spending for the Mortgage industry. However, there is the danger that these rates will drive folks back into making bad financial decisions and get into a new mortgage crsis.
Personally, I love it since it brought down the par of the interest rates from 6.75% in October to 5.75% in January and still dropping and I’m looking at purchasing a new home.
Hopefully, folks will go out and get their Hybrid Vehicles and help inject some needed money into our economy, but somehow I doubt it. However, the rates have not translated into Credit Cards.
The market is no longer local and the implications of lowering a rate here, Canada and London have been caused due in part because the jobs created in India between 2004 and 2006.
Most of the clothes bought today where neither made nor assembled in the U.S. This has had an implication and the textile mill industry in this country can no longer compete with China or India. Car parts have been made in Vietnam for more than 10 years. So, what do we make in this country? Minerals, Oil, Gas, Food and software are our primary products in our Nation.
The rapid transition of many industries has caused problems and the rate of spending at 1 Billion per week in Iraq has not helped the situation any.
To add insult to injury our relationship with Venezuela (our primary source of Oil) is in shreds plus we continue to spend money on the notion of the war on drugs. Foreign investors are purchasing land in the U.S. like its being given away for free (because it almost is).
Will the fed lowering the rate help? In part I believe it will, but how much or how little it is hard to know. Ask me in August and I’ll let you know.
I think that it is too late for the fed to “man up” because he has already lost credibility around the world in this respect. His wild 75 point cut to save the market from having a bad day bordered on the line of market manipulation or just flat out strange behavior. Just like a crooked cop can no longer be trusted to enforce the law, I do not see how the Ben can pretend to not be kowtowing to the tantrums of Wall Street. He will no longer be able to pretend to be independent but will always be Wall Streets boy. When the Street says jump, Benny won’t say “how high” because he will already be airborne!
There were several obvious factors that precipitated the 0.75% cut (and I’m sure there were others as well) –
1. US markets were closed on Monday the 28th, but the futures markets were predicting that the Dow would drop almost 500 points for Tuesday following massive sell-offs elsewhere.
2. The FOMC may have caught wind of the unprecedented fraud at Societe Generale, which was not disclosed until after the fact so that the bank could unwind its exposure to the fraudulent trades.
3. Several monoline bond insurance agencies are teetering on the precipice of a downgrade by Moody’s, Fitch, and S&P. Since these agencies essentially lend their own investment-grade credit rating to less creditworthy issuers, a loss of that investment-grade credit rating would also apply to all the bonds they had insured. This raises the spectre of forced sales by pension funds, which are legally required to hold only investment grade bonds in their portfolios. All this at a time when spreads are already widening because banks don’t trust each others’ solvency due to subprime.
Any one of these is scary enough individually. The Fed may indeed be kowtowing to Wall St., but the alternative is the very real possibility of a catastrophic failure of the financial system. It’s the very definition of moral hazard; many of these banks are simply “too big to fail”.
It’s too late to fix the mistakes that led to subprime. All we can do now is to agitate for sensible regulation that keeps pace with financial innovation going forward (not necessarily another Sarbanes-Oxley).
The effect of such lowering of rates is to make saving and cautious investing so unattractive that it pushes individual investors who are trying to provide for retirement into the market with the professional hedge funds and other sharks. Encouraging decent returns for conservative investments (such as CD’s) is vital to the health of our economy, long run.
Ben does not believe in savings, he wants the entire US citizens to invest in stock markets, thats the reason he is market friendly and bows to their wishes.
throw your hands up if you just dont care. the recession will do us good as stock prices will fall allowing new investors in on wal mart prices
the us is the closest thing to a true market economy, and for the most part it does work.
risk assesment is key in any investment and paying someone who did not perform a proper risk assesment just saying to others, ” go ahead make a bad descision, we will cover you” is a mistake.
let those who invest wisely reap the benefits, and those who invest without research learn a hard lesson.
the free market in theory works, let it work and the “invisible hand” will return it to equilibrium. play with it and it wil oscilate for years
Watching FED actions recently, i guess they are being bullied by both wall street and politicians. Unfortunately Helicopter Ben is going to live up to his name and his successor has to clean up the mess by raising the rates above 10%.
I fail to see any direct correlation between the raising or lowering of interest rates and what is best for our economy. I do know that China is an awakening giant consumer and that our time as the world’s leading economy is passing. Does it really matter what the Fed does with interest rates?
FED should lower rates to zero. Wait, they should make the rates negative. Charge a 5% annual fee on all the savings and money market accounts. That should teach all the stupid savers. If you dont spend you are unpatriotic.
BB shame on you! It appears BB was hired to be the chairman of the Wall street not Main street or Federal Reserve. He and his boss should be impeached before we all die of hunger!
Thank you CNN for your courage.
Hahahahaha….what a joke this article is….is Bernanke being bullied by markets?!?! You are an idiot sir; the attempts to manipulate the market only temporarily effect the markets…markets will ALWAYS prevail. Irresponsible gov’t spending, the consequent devaluation of the dollar, and according lack of corporate fiscal discipline have all combined to form a wave of fiscal disaster that even the puny interest rate cuts will not stop…everyone needs to wake the hell up.
I’ll start with a simple axiom “The economy cant go up forever”. If we try to alter it in such a manner our own intellect and greed will surely do us all in. As it is, too many save too little and have speculated way to much on what there real estate is worth.
This has created our current condition which if left alone will balance itself out.
If the fed continues its current path to appease the masses I believe we are headed for a sure recipe to create another great depression.
I do believe that Wall Street has a mighty hand when it comes to Bernanke and his decisions. It’s sad to see that a guy that is supposed to be in charge and supposedly a great economist, is letting everyone else push him around, instead of taking a stand and doing what he knows is correct and letting the market correct itself in a normal pattern. Of course the already RICH politicians and Wall Street occupants don’t care because how much will inflation hurt them? Not one bit. As the article said…It’s time for Ben to pull his pants up and show why he’s the man ‘in charge’.
A wise man once said “You cannot borrow a better standard of living. When we borrow, only our banker achieves that”. We are squandering our long term wealth prospects in the name of short term feel-good-ism. And this is different from how junkies behave… how?
If it is the goal of the Fed to achieve dollar parity with the Mexican peso, however, they are definitely on the right track.
Capitalism is prone to asset price swings and the occasional bubble. It is via the recession process that such profligate behavior is reconciled. If we cannot reconcile the excesses in our economy, what will happen? I suggest an analogy based upon a pressure cooker – a device that is perfectly safe and useful as long at the pressure is vented slowly and carefully from time to time. Yes, we can stop the venting (recession) but only for a time and then… BOOM!
Besides the hysteria concerning the “R” word, a lot of us out here have another name for it and that is “buying opportunity”. 
STOP BAND-AIDING THE BUBBLE! Let it deflate.
I think we already have economic stimulation. Right now consumers are out maxing out those credit cards to get those final purchases in before the party ends.
The party will end. I have great concerns about how bad the hangover will be. Anyone who thinks we are beyond going in to a depression like the 30’s is only kidding themselves.
The economy needs to correct. We can’t keep going on living in debt.
The FED is trying to cure a drug addict by giving him more drugs. I doubt this will have a happy ending, actually it’s down right scary.
For those who, rightly so, complained that lower interest rates will hurt retirees, I’v got more bad news for you, or those who depend on their 401(k)’s. With the savings rate of todays workers becoming more negative each year and a decreasing ratio of young to old, exactly WHO will be the ones to buy these retirement funds as as the boomers start cashing-in en masse in 2010? If “helcopter” Ben does not keep the market going up at a rate higher than inflation, this could be the start of a long bear market, like the 15 year one in the 70’s. The older, smart boomers who cash out early might be OK. But the rest of us who retire later are screwed. I suppose a SS check is the most secure as it’s guranteed by the Gov. and indexed to inflation.
You would have to be an idiot to support the idea that the FED abandon the stock market. Since the majority of working stiffs have their savings or retirement plans in some way tied to the market, whether its a conservative or aggressive investment. In many cases this is the only choice you have as an employee in most companies. You want loss of consumer confidence or an out right revolution let the market go down and out.
The FED and the Goverment are trying to bail out the already overpriced housing market. Let the market correct and we all will be better off in the future.
The Fed is APPROPRIATELY responding to the markets. The wealth of most americans is tied up in real estate and the stock market (through 401k, IRA, pension plans, etc…). We know real estate is in the toilet, which crimps spending and pushes economy into recession. To have the market in the toilet too will make the recession deeper and last longer, thereby undermining one of the 2 official fed mandates. So i don’t seehow people can say it’s not the Fed’s job to worry about the markets. It’s the Fed job to worry about the economy, in which the markets play a tremendous part. People who say otherwise are being short sighted and have not thought things through.
The FED needs to RAISE the rate to at least 7 or 8 percent to encourage saving and strengthen the dollar. In the meantime, instead of a rebate the government should set up 3-month CDs for $500 for everyone, thus boosting banks. Instead of more debt and spending, we need to stop spending.
amazing the misinformation abounds. Kill wall street and kill the golden goose, what short memory our country has! Remember 1929, remove the banks, don’t help Wall Street, and we can all start saving scraps of strings and stand in bread lines. I rembember my first home in 1980 had and interest rate of 18%, yes I will praise the Fed for helping, a little late, but better than never. We Americans need to lay down the panic or it will be self-fulling. 5%unemployment would have been a heaven sent gift in other times
I’m all for Jacksonian Democracy. The Federal Government is basically a monopoly. I say goodbye to the Federal Reserve. And while we’re at it, the I.R.S. Flat tax would be nice as well.
It’s quite interesting to see that Bernanke is now pandering to the speculators on Wall Street. If he continues to dance to the gong of their bells, he might inadvertently be swimming in the pool of looming inflation. It is this same speculators that would crucify him that he has gone too far with cutting interest rates.
Bernanke should let the market play itself out.
It’s so comforting to see posts from those who most likely commended Alan Greenspan for precipitously decreasing rates post 9/11, which incidentally created one of the largest eras of post war growth/wealth in decades, needless to say a substantial recovery after the terrorist attacks, and also allowed many of you who now condemn Bernanke for doing the same, to enjoy cheap credit and purchase homes and gas guzzling SUV’s you could not have afforded under normal circumstances. Easy for those who sit perched in their lofty Condo’s or posh homes, with substantial savings, and comfy jobs, to say that Bernanke is caving to political and market pressures and should just let the chips fall where they may. I’m not an Economist, and most likely neither are any of you who have posted your little diatribes bashing Bernanke, who is simply doing his job! Get off your high horses and support the cause. The U.S. may be ever so slightly down, but we sure as hell aren’t down for the count by a long stretch!! PS Just be sure to spend the forthcoming fiscal stimulous money on U.S. manufactured products and let’s get this train back on the tracks!
While the Fed has lowered rates significantly, I believe they raised them too quickly as well. There did not seem to be any real threat of inflationary pressure, yet the Fed responded as such.
The Fed has been so far behind the curve that it may,in fact,be too late to catch up. The Fed has two mandates (inflation and recession) and it has all but ignored the latter while obsessing about the former. It now is focusing on the latter but not because Wall Street bullied the Fed but because the overwhelming risks are now on the economic contraction side of the equation.Just ask your local department store manager.
The housing market is not near a recession, at least here in Michigan it is in a bonifide DEPRESSION!
Now, if lowering interest rates another .5 percentage points allows folks to buy a home, renegotiate their exsisting homes, and stimulate the housing market, where a LITTLE INFLATION would indeed be welcome, than lets do it!
C’mon you Wall Street talking heads, the average person’s entire life is wrapped up in their home….not everyone can stand back and be as cynical as YOU!
I think the Fed should not lower interest rates. The stock, financial and commodity markets, by nature, are cyclical and some go up and others go down and the market needs to correct itself, NOT ARTIFICIALLY, which is what is being done here. I agree that certain sectors of our economy are in bad shape but it is from bad business decisions made by those companies NOT the Fed and it is NOT the Fed’s problem. It’s just like me saying “I have a job but cannot pay my bills because I do not make enough money.” Will the Fed come and bail me out too?
What Ben B is doing is what Greenspan did for quite sometime, and what got us into this messy bubble of shady loans, history repeats, with everybody’s consent…party on!!!
What a country, we have the lowest savings rate in the industrialized world & per Prez Bush we need to save more, so lets cut rates, again! This is purely the greedy trying to save Wall Street- what about a true free marketplace, not a manipulated one. Reagan pulled the controls and regulations and 20 years later we feel the result- re-regulate the loan market the airlines & THE OIL COMPANIES and see what happens to the economy, oh I forgot its a free market…..bs
Great article and not the only warning we’ve had about rate cuts. So it is a delicate balance, between support and let the market settle it’s own bottom price. But let’s not have more cuts, please! since the last one did not work and I only have CD’s.
This is an abomination. The Fed has become no different than the S&P index funds. What about people who depend on rates such as retirees, small buisness
Yes, the Fed is allowing the “market” and Washington politicians, who only want re-election, to push it around. We should have taken our medicine in Oct/Nov ‘07.
A healthy drop in stock prices last Fall, would have made it safe to invest now. Instead, the Fed keeps applying band aids that soothe temporarily, but do NOT cure the disease. This is going to cause a bigger drop later. Interest rate cuts are weakening the US $, raising inflation, and hurting US stature as an economic power.
“The ultimate result of shielding men from the effects of folly is to fill the world with fools.”–Herbert Spencer
It isn’t only the younger generation that can’t appreciate the value of a dollar. Hand out the dough to them and it doesn’t mean a thing–there’s more where that came from? A depression is a hard way to learn a lesson–but, I think it would be good for America.
We can only hope that stories as such never show up in the CNNMoney portion of our browsers again. Tough when the average Joe may check this out & put any level of confidence in it. Pysch degree + economic commentary. Lovely.
I don’t think they should increase rates so quickly the way they did and now decrease the rates so quickly because it sends the market/economy in a tailspin and doesn’t allow it time to sift down. I ALSO THINK THEY SHOULD PUT A BAN ON ALL NEGATIVELY AMORTIZING LOAN PRODUCTS! not all of the ARM products are bad products, just the negatively amortizing ones. I personally think this is a huge reason for the market decline and lenders continue to do these loans and buyers/home owners continue to wonder why they end up upside down in their homes or with no equity left! Thus a significant reason people let their homes back to the bank! That and the fact that the loan rates on these products can get ugly very quickly!
The FED is not a real Government Agency. Rather it is a a collection of banks working with the government (Quasi-Public) in the interest of the banks.
So Bernake is doing his job. Watching out for the Banks!!!
Everyone give them a round of applause!
The FED is obviously being bullied by Wall Street, to the detriment of Main Street. Yes, cutting the FED Funds rate did benefit every consumer carying a credit card balance and/or a Home Equity Line of Credit balance. Indeed, for every $10,000.00 borrowed, the most recent rate cut puts $75.00 per month back in consumers pockets. At the same time it continues to devalue the US dollar which in turn helps to drive up the cost of everything we buy. I see how the rate cut helps China.
I also shudder with every mention of a “stimulus” package. If you send every tax-payer in the U.S. a check for $600.00, they’ll put $85 of it in there gas tank, send $400.00 of it to their gas and electric company and the rest will go towards another bill. All this at the cost of yet another $100+billion to the tax-payer. How much higher will we have to raise the country’s debt limits? How much will this truely cost our children to pay off?
The worst of all is that not one politician has mentioned targeting the exorbitantly high price of oil. According to the experts (aka OPEC) they can not ship anymore oil, so producing more with no where to ship it makes no sense what so ever. It also shows that there is no “supply problem”. What is the problem, according to the Saudi’s, US hedge funds who are borrowing $10 for every $1 they have to buy and sell oil futures contracts. You want to see oil go to $45? Force the Chicago Mercantile Exhcange and the New York Mercantile Exchanges to change their capital ratios to 5 to 1 from 10 to 1. That easily, the game is changed.
Every $0.01 decline in the cost of a gallon of gasoline equates to $1.0 billion dollars annually going back into consumers pockets and it would cost the US Treasury $0.00? So why don’t we hear this from our politicians? Why is no one talking about selling oil from the SPR? Why don’t we even see regular articles in the media discussing the damaging effect of high oil and gasoline prices?
I wonder how honest our government and the Fed is when we are told on the one hand, that we have a strong, robust, dynamic economy, but on the other hand we NEED an EMERGENCY .75% rate cut?!
I didn’t think I was at the shore, but I definitely smell something FISHY!
Alan Greenspan, where are yoooouuuuu?!
yes, the Fed has gone too far, and I used to work there. The greedy market creatred this mess, with a blind eye from Greenspan, and not America needs to take it’s lumps, quit being the world’s cash register and start managing our money like adults. yes, we’ll go into a recession, probably a bad one, but enough is enough. Grow up capitalism!
I am a honest, hardworking, single mother who has been a mortgage banker for 23 years. I have not been able to make loans to everyone, only those who acutally qualified. I have always chose to be employed by conservative banking institutions and will never make the 6 figure plus income others in my field have. Those lenders have continued to contribute to the publics negative view of mortgage lending. It must stop, the good people of this business are simply tying to make a clean honest living helping others to have a home of their own as well as an investment for the future.
In answer to the question posed I say Yes. I also have the same sentiments as Mr. Fisher. As I’ve been told, sometimes when your helping your hurting and when your hurting your helping. Rates are beautiful right now and even over this past year, who would have ever thought we’d be lending in the 5’s & 6’s back in the late 80’s and early 90’s, not I.
I have no sympathy for the idiot, greedy, impatient sub-prime BORROWERS who are whining that they were “duped” by the evil mortgage company. Learn how to read a contract and don’t assume that because you courageously saved up 800 bucks and you have a 470 FICO score that you were somehow the victim here. You knew from the get-go you had no business buying a house with nothing down and a 1% teaser rate. I’m not saying to come down hard on unethical mortgage brokers and the corrupt rating agencies calling these loans AAA grade. But stop appeasing these “victims” and let the market take care of themselves. The strength of our dollar and the long term health of our economy is much more important than bailing out idiots.
Your commentary is listed under the heading “LATEST NEWS”. CNNMoney reports commentary. Good job. It’s not the first time. I’m through with your site.
as my grand pa use to say ,they is two thing’s son you can not do. and one of them is you cannot drink your self sober .and the other one is you can’t borrow your self rich. about the only thing i know to do, as a poor person is to get the crock pot,s out and the soup bean’s on. and buckle up for the ride.
The Fed has no backbone. While I agree rate cuts have been needed, the fundamental issue that created the problem is just being kicked down the road; housing is a mess with prices above historical highs and as a percentage of GDP. Propping up the housing market is stupid. Transferring money to the banks that made the loans or didn’t do their homework is also ridiculous. The Fed needs to make clear that there will be pain in housing, but that it is better to deal with the issue quickly, and avoid the inflation menace, rather than to let it keep the economy down for a long time.
The Fed needs to stand it’s ground. No more rate cuts.
The stimulus package is BS. The only thing people are going to do with that money is fill up their gas guzzling cars.
$120B straight to the oil companies.. great f’n idea.
I think the Fed is being bullied by the markets, and I think the avg stock holders are also being bullied. Wall Street owns America, now who will they put in the Oval office next?
The credit crisis was caused by too much cheap credit courtesy of the Fed. Now the Fed is trying to mitigate the consequences by more of the same. Can a fire be put out by adding fuel to it ? The Fed seems to think so. The Fed is too focussed on pleasing the markets and the politicians by short term fixes that are unsustainable.
The FED is helpless. The ship (USA) that we all love has a huge hole in it’s haul and is beginning to sink.
It breaks my heart to see how the leadership of this country has squandered our wealth away. The practice of easy lending has degraded the social and moral fabric of American Society. We are issuing IOU’s that our children and grandchildren will have to repay.
The best example of this is the VISA commercial where a lot of young adults are dancing/partying in what looks like a shopping mall/store. Each time someone swipes the Visa, the party keeps going. The music stops, and everyone freezes, then someone painstakingly shuffles over and swipes their card, and the music starts again
The other choice is that they can DEFAULT our debt, and then financial textbooks would be re-written. THERE IS NO SUCH THING AS ZERO RISK (I.E.– US Government Treasuries are paraded as Zero RISK in all Financial textbooks and generally thinking).
The only positive Macro Economic trend for the US in the past 10 years is that we now own 112 Billion Barrels of Oil in IRAQ which we can later resell at a much much much higher price ($1000/barrel?). We didn’t go to IRAQ for the sandy beaches and nice weather.
When the rest of the world realizes they don’t need us to buy all their stuff at Wal-Mart, they will sell our bonds en mass. Then the FED will be helpless because interest rates will inevitably rise. (higher supply = lower price = greater yield %)
So in conclusion, the ship is sinking, the smart people on top are taking whatever they can before it eventually capsizes.
Where will you be when this game of musical chairs ends?
Probably standing and holding a hot potato too.
No the Fed is not Bullied by the Markets – however, the Fed was late in realizing inflation was not the risk and waited much too long to lower rates. High, oil/gas prices among others are a DRAIN on consumers that in and of itself helps contain inflation. You can raise rates later.
I do not know whether the Fed is being bullied by the market or not. The 75 basis point cut and the timing thereof was to keep the financial markets operational after steep losses on Monday and early Tuesday in Europe and Asia.
The next step is perhaps to cut by 25 basis points this week and ‘keep the powder dry’ for another inter-meeting cut (no meeting till March).
The Fed CANNOT obviate recession, but it can inflation. And that is where the Fed needs to be whileCongress works its duty to keep the economy moving.
It is the Fed’s job to:
1. Provide sufficient liquidity to keep the financial institutions operational
2. Institute policies that control inflation
It is NOT the Fed’s job to support the tock market.
While enough has been said about the subprime mess (and the Fed, Congress as well as the financial institutions are to blame for that. But not enough has been said about the effects of higher oil prices on the overall economy and inflation.
Further, inflation has been kept in check due to ‘product substitution’ (replacing expensive US/European/Korean/Taiwan products with Chinese). Now that, too, has come to an end. So inflation is a bigger threat to our economic well-being by reducing purchasing power.
The FED sold out to wall street and the cry babies long ago.
Low interest for savers means that retired folks that depend on interest income for money to spend to drive the economy cannnot spend what they do not have.
Sell your stocks boys, pony up and spend-spend-spend to drive the economy cause us retired folks cannot. Buy a cheaper house, sell your car, take a cut in pay. Do the things you are asking the retired folks to do by cutting interest rates which is their pay check.
Cheap interest and a devalued dollar took away our chance to help you cry babies.
Well, Reagan started the downward spiral with his trying to outspending and financial collapse of the Soviet Union in ‘82. Now all Wall street wants is easy money. Look how today they are pushing the market up 129 points at 3:54 PM hoping that they will get another 50 basic point cut in the Fed Funds rate.
Didn’t anyone listen in 2003 when Allen Greenspan and GWB said that “everyone should own their own home/and business.” What they didn’t say “is if it fails it is your fault not the governments fault”. Well that 1.75 Trillion dollar tax refund and the low interest loans drew every slimy predator lender to say “don’t read the fine print as it doesn’t apply to you”. Then GWB hasten to chide the borrowers that they should have read the fine print and the “Snake Oil Dealer” wiggled out of another one. Remember WMDs in ‘02?
But What about Iraq, with his long term commitment and permanent bases to protect the very hostile environment that surrounds the “Collossal Embassy” Now Petreaus arms the Sunni Nation with weapons and $800/mo to join to fight against the insurgencyto build strength to a possible overthrow of the “DEMOCRATICALLY ELECTED GOVT. by the 12 million PURPLE FINGERS”
Fool me once, shame on you, then fool me twice then shame on me, should be what the Shi’ites should be saying as they remember the 10s of thousands that were slaughtered by Saddam army in the Southern section of Iraq by a failed promise of help to overthrow Saddam Hussein.
Remember the unearthering of trenches in ‘04. That horrified the American public and that was the result of a broken promise to the Shia govt. by our own govt. in ‘91. Our country was bound to forge a place and disrupt the middle east for our own greed.
Five more died today in Iraq it seems that the “SURGE” is still killing our troops this 1,732 day since “Mission Accomplished” Tonight he will say we have some rough spots in our economy. My God I found some smoother roads in the back woods of the USA.
The entire group on Wall Street including CNBC are nothing more than a group of GREEDY BASTARDS.
Maybe we’ll see a rate cut down to “ZERO” and then we’ll all go down the tubes together!!!!!
Given that it is an election year, it does not surprise me that the Fed is giving in and lowering rates. However, I certainly do not think lowering rates was a good idea. There are far too many inflationary pressures as it is with higher than ever fuel costs trickling down to every area of the economy. It is counterintuitive. If we really believe in market economy mechanisms work, the Fed should have held firm and let the banking industry take it’s lumps. Not to down play how bad it really is in economic terms, but bad lending policy created the sub-prime crisis, let them learn from their mistakes instead of bailing them out and let the market correct itself. Lower rates will only perpetuate an environment which allows consumers to take on more debt than they can handle. Shouldn’t the Fed be encouraging savings instead of spending? Higher savings rates turn into higher investment rates, for the long term that is what we want. Shouldn’t people be learning some lessons here as well? Don’t take on more debt than you can handle, take responsibilty for your financial decision, don’t keep spending money you don’t have. Granted that spending keeps the economy going for the short term, but the long term health of the economy is being adversely affected by recent Fed decisions. The stimulus package as an attempt to exercise monetary policy will likely only have a fraction of the intended impact if people are smart enough to use the money to pay down debt or save it for when they really need it in what is likely to be an extended inflationary period.
I think the fed is being bullied, and I’m happy to see that the opinion reflected in this article is seeing the light of day.
Equally foolish, I think, is the stimulus package being bullied through congress. Guys like Peter Schiff and Ron Paul have been called pessimists and perma-bears, but I happen to trust their opinion much more right now.
Yes, the FED is creating another ERA of cheap money which in trn will cause more housing inflation and creative financing which got us into this mess in the first place.
We just had years of LOW interest rates!
We live in a nation that encourages DEBT and DICOURAGES SAVERS. Will everyone be happy when housing goes through the roof and people can BORROW forever and ever..is that what runs our ecomony.
LEAVE THE RATES AT 5%.
WHY THE THE FED LETTING WALL STREET TELL THEM WHAT TO DO?
I AM BEGINNING TO HAVE LITTLE FAITH IN OUR BANKING SYSTEM…
Bernanke needs to get fired. He is entirely being bullied by the finacial houses and the Wall Street traders. It is PATHETIC. The Fed is NOT there to bail out these greedy investors or financial houses who make stupid investments. But evidently Bernanke has shown he is simply a stooge for Wall Street. He needs to be fired.
The Fed is robbing from savers and giving to the highly indebted. Small wonder that the net savings rate in the US is negative. The deck is stacked against anyone who saves.
It is quite clear that the housing market is inflicted with numerous and deep issues. These issues are to large to repair themselves, therefore a loosening monetary policy is a must. However, there is a caveat here. The trickle down effect of rate changes takes time, and the Fed is oftentimes to quick to react with these changes. A slower, more consistent and smaller change would work better.
On another note: Our country’s credit line is expanding just as quickly as it’s waist line and perhaps a little discipline and personal responsibility on our part would keep us out of circumstances like the one we are in now. We need to stop trying to keep up with the Jones’s and live within our means. Anyone with a pulse can get a loan nowadays and perhaps more stringent lending criteria would help avoid such massive delinquencies!
No, not bullied at all. Quite the opposite. Bernanke was put in place by the Administration to do exactly what he’s done – Prop up the stock market, bail out business, the wealthy, etc. Evil, but that’s why he was given the job.
THERE IS NO BUBBLE
REPEAT: THERE IS NO BUBBLE
WAKE UP! FOREIGN GOVERNMENTS ARE GRABBING OUR BANKS AND OTHER ASSETS AT FIRE SALE PRICES!!!
Housing Bubble != Internet bubble. I’ll make it easy for you. On a $500k house, it costs $100k for the land and $300k for the construction, so it is only overvalued by 20%. Internet dot-bombs were valued ZERO.
Rescuing the economy starts with rescuing the markets.
A crisis in subprime, which is like 10% of all loans is causing the other 90% to crash. This crashes the banks, and finally the market.
What do you think happens when the market crashes? Companies fold, people lose jobs, corporate raiders come in and dismantle business that were solvent a year ago.
YOU FOOL, WHO DO YOU THINK THE MARKET IS? WE ARE ALL THE MARKET NOW.
The fatcats got out last August and are piling cash on the sidelines. How do you think they make their profits? They won’t settle for 10%, they want more – they need more to cover the tax hit. The next rally will begin when the last regular Joe gives up and sells out. The fatcats will move in and all of us will bless them for rescuing our 401Ks
Everyone wants to see those people who borrowed beyond their means pay – and they will – via their credit rating. In the meantime, give the Fed and Banks time to unravel the bad loans from the good…
Recession coming?
Try a depression.
With inflation at 10% we are all screwed.
Greenspan started the mess, Bernanke is favoring Wall St over Main St and everyone gets screwed.
This type of ‘Macho Ego’ editorial has nothing to do with reporting on a recovery plan for the health of the economy. Paul R. La Monica, how about you ‘man up’ and stay focused on the central issue.
Yes, and they are choosing the path of popularity vs. fiscal responsibility. I am concerned about inflation and the plunging $. We need a correction to this huge bubble that we have experienced. Is Jim Cramer really as ignorant as he sounds when it comes to fiscal policy?
The whole issue is complex but interest rates need to continue to be lowered. When interest rates are low people will buy things. Businesses can grow. Low interest rates stimulate the economy.
The big no no’s to worry about for inflation are no bailouts for banks or individuals and put a stop to the morons in congress and their wasteful spending. Finally, we need a plan that will allow us to be energy independant in no more than ten years.
A recession is not necessarily a bad thing. Anyone who thinks an ecomoic panicea comes from short term rates dropping is sadly misguided.
Our economy overheated due to the free cash turned over on home equity. Plain and simple. New businesses were started and people took money and spent it.
Now there is no availability to borrow money against a home. People who wish to start businesses can’t. People who need money can’t get it from their homes.
With real estate prices falling, the only possible outcome we can hope for is a soft landing. This would be helped by the short term raising of conforming loan limits (Fannie and Freddie) and the long term fixing of FHA.
Bernanke is controlled by Wall Street and the White House and Greenspan was the same way. These two people have helped destroy our Economy. Our enemy is Wall Street. These people are crooks and should be in jail. How Wall Stree and their “analyists” (people that have never had a real job) measure companies the way they did in 1930, Things have changed but the Govt and wall Stree and Bernanke are worthless. Gold went up today to 927 an ounce hearding toa 1000, where is the dollar.
STOP let the Markets self correct. Countrywide, the banks and Wall Stree made killings off “BAD LOANs” not subprime bad loans, why should I have to pay for their greed??? The govt shows how stupid they are by reducing the rate, let the Market self correct. You are destroying the Country by trying to help.
Congress they are so dumb they know nothing about the economy and let his type of stealing happen.
The Fed does a disservice to our citizenry when it fails to hold the markets accountable for their inept practices. Painful it may be, but the quicker the dollar returns to stability the better for all.
Comments ranging from FDR leadership, Adam Smith, to Common Sense 3% living make a strong case for intellectual and working man blues, but, no matter, the facts remain,this econonic situation was fostered years ago.
It will get much much worse. There are no viable plans to curtail its negative impact on life and financial ruin. I kid you not.
Ignited by runaway lack of financial oversight, building, government lack of citizen freedoms and protections, plus, lending practices, lack of CEO and CFO being held accountable for business practices and accounting practices, A very bad string of presidents, Regan, Clinton, Sr.Bush, Jr.’nuklar’Bush (should I include V.P.’s?)and their respective adviser’s, from Greenspawned, Albrighty then, White on Rice and a host of military pundits … ladies and gentlemen, the USA economy is no longer yours to adjust/ride out/get over/make do or do without, as in the “good ol’ days” (believe me, there never was such a thing – as I remember walls insulated with newspaper stuck between only the widest cracks)- Truly, we are a nation experiencing the worst of not being able to “Pull Ourselves Up by the Bootstraps”, we have sold ourselves to bad financial things, bad governmental things and lost our voices in the process.
Quote all you want, the financial facts relating to Smith’s economy based on Raw Natural Resources is over for the USA, an economy based on metal based money is over for the USA, our schools education is overrun with socialist, appalling grade teachers, professor’s and instructors, Including their Lobby and Representatives, and education is abysmal for over half of the USA. Forget freedom of religion. Religion has gotten political. Tainted.
America, it is time to wake up and toss your TV set advice and news media drovers! Wake up to being “worked hard and put up wet” (taxes, sucker wages,insurance disasters) by your politicians, who are retiring as millionaires! Wake up to the facts, READ YOUR OWN ECONOMIC BOOKS, STOP LISTENING TO MASS MEDIA FRENZY, TAKE CONTROL OF YOUR LIFE!
Start with your person, your own mental ability to think clearly. Think positive. Expect results. Ask direct questions of those that can only answer you truthfully. Be grateful for what you have. Start from there. Compare your life with third world countries.Making money is not an option for those older and retired? Not always true. Mostly, but not always. My neighbor makes high earnings at 72, working 40hrs. week… there are minds to be tapped at retirement age, those minds have lived through very tough times. This time is so different, we have zero lack of tolerance for basic human rights, basic human living conditions, zero respect for elderly and foreigner’s, yet, we all trace our roots to distant lands.
My Answer? Get REAL TUFF AMERICANS. The future is not pretty.
INNOVATE. Going broke? Ditch the loads that are breaking your back. Pick up the pieces, if any, and build your own reality. No job? Make your own job. Make being “you” a better person job number one! I like to hire people who are courteous, clean, well spoken, careful, grateful for a good job, and who go the extra mile for others! Picture yourself as your own boss, would you hire people like I hire? Hire yourself. Create your own work. Start your own company. Service and Food companies are sure starts. Transport will lag for better implementation. Janitorial and environmental will be a huge hit.Start writing books. Create books and advice for teachers at home, not everyone attends public school, you may not wonder why! Inventing. Organizing. Farming. Building. Do What You Must Do at all costs,but above all, Be Passionate. Not obnoxious. Passionate.Goals are a man-made device to replace Passion. Passion is made of determination for something built of Love. Love Yourself, Love your life, Love your work. Happiness will follow. It must. It is a law of returns.
True, the prudent investor, the retired saver, the little ol’ gray haired daddy are all getting the shaft. Only few of the High Fly club will get saved, they will continue messing up. They have no instruction manual, they do have a destruction manual. They will someday ask you for food, maybe a hot meal. You, will be in a good position. you have the Tools To Rebuild. They will have bank accounts, but no food! Medicine is in a state of disarray, the oversight and the regulations are lacking, especially for elderly. Social security is the ONLY Trust Fund with money in it. Think it will last long? Prepare to replace these social programs with your own very special care. (Family based and logical, working solutions to Diabetes, Cancer, etc.)
When I see Financial columns such as these, I see baby-talkers, gobbledy gook high fiance talkers, raised on media talkers, rarely do I meet the grit of old America. Those who truly made America great.
You newby’s must tend to a whole ‘nother set of rules and situations, but if you follow just some of my lead, you will make out okay. Actually, America will never be like the fairy tale portrayed in the make believe (there were some doozies at one time being displayed in classrooms) history books.
Good Luck America – I am sure we will all be amazed at the transformation.
Shame on the Fed Board for raising interest rates 12 times in 15 months. Where is the time out to see if what you have done is working. As Fisher the alternate says it takes time for interest rate cuts to work. One has to wonder where his mentality was when they raised the rates so quickly. Can he say what harm or good the Fed Board did with so many increases in such a short period of time.
Yes indeed!! It’s the HOUSING MARKET, not the STOCK MARKET! The stock market will take care of itself – FIX THE MORTGAGE INDUSTRY!!
I say eliminate the Federal Reserve, return to the Gold Standard, eliminate the IRS … AND, pay more attention to; (1) the dishonesty inherent in corporate America and government, and (2) our insane disproportionate spending for a military all over the world which is both bankrupting us and turning the world against us.
Time to get honest and back into balance.
I’m tired of the warped exploitive dominance of the patriarchy … and that doesn’t mean I endorse female “duplicates.”
I want a nation, business climate and human community that is fundamentally committed to “whole community wellbeing.” And that has squat to do with our thinking we can run the world and turn it into our resource base.
We are 5% of the world’s population chewing up 55% of its resources – and that’s not only not sustainable, in all its various dimensions, it represents an act of premeditated murder of an unfathomable number of people, whole cultures and the Earth itself.
Time to wake up, get honest, and start nurturing life vs exploiting it.
I believe that Ben Bernanke has some hard shoes to fill replacing Alan. I am only 25 but have been watching money.cnn.com everyday for the last 6 years being both a loan consultant and a Realtor. I believe if the FED’s cut rates again to help the economy there would not be such turmoil left for the economy in the years to come. My reasoning behind that is that you cannot do the loans you used to do to put people into homes they cannot afford. The stated fixed income loan is what has this whole thing backwards. Someone who had a 600 score could buy a property with 100% financing that did not make enough money to qualify. What do I say to the investors on Wall Street that bought that paper? HA! Reasonable risk factor has to be assesed, and income proof being a major validity of backing a debt should never be compromised for people who have trouble paying there normal bills to the point there credit is as low as a 600 score. Taking those options away from a self employed borrower would be horrible to the small business owners of the United States. Keep the idiots off of Wall Street and when revenues drop 95%, someone made a few bucks and got out. I wonder why all the major corporations are changing CEO’s???
Wall Street OWNS the Fed so it is besides the point as to whether it is being bullied. Even the Treasury Dept’s OCC dismantled attempts at the state level to create transparency of subprime loans to downstream owners which would have prevented the current mortgage crisis. The Feds have heeded Wall Street to eliminate regulations and consumer protections, even for retirement funds, and is now belatedly trying to keep economy from going belly-up.
Clearly we are a borrow and pay back (at sometime in the future) society. Our debt, both national and personal, is a catastrophy and will not end pleasently. More loans? It seems to me that the we all need to change our standard of living and get back in line with what we can “really” honestly afford.
Yes the market is pushing the Fed around. Our children and grand children will be paying the price of our life style today. It’s about time to tighten our spending belt and save more and be a true economic power. Look it at China 5 years ago vs today. Very soon we are going to be hostage to China economic power and they will be a super power and we cannot stop them.
Listen to Fisher…The Fed could actually exacerbate the problem!
Let the bankers, brokers and realtors pay the price.
Our economy has been one of bubbles ever since the dollar was taken off the gold standard. Each progressive bubble has been more heinous than the last. The Federal Reserve should ditch its old theory that the aftermath of bubbles can only be dealt with in hindsight. If Greenspan had nipped the housing bubble in the bud, then Bernanke would not be fighting the impossible battle that he now faces. The housing bubble’s natural progression cannot be stopped. Bernanke should stop cutting interest rates.
The housing bubble was the creation of consumers being suckered into the Myth’s, bigger is better, and what goes up will not come down. These two myths coupled with a greedy loan industry that figured it could cover up bad loans by selling them in bundles throughout the world. And as long as housing prices continued to rise the party would never end. But this Pyramid scheme burst and some poor fools are holding the bag. Now banks and wall street are crying to the federal R and foreign governments to bail them out.. Homeowners are walking away from their debts and the taxpayers are forced to pay for worthless paper securities. Our government proposes billions in bailouts, even though our federal decit has climbed to over a 10 trillion $$. The same time the Bush Admin declares two wars and lowers taxes. Add to it Bush’s “do nothing” energy bill to develop alternative energy, and we will be stuck at the mercy of our “buddies” in OPEC till Hubbards Peek becomes a reality in the next decade. Sometimes I think Congress is brain dead!
A strange question… Given our appetite for printing money, borrowing from China and deficit funding for everything including operations budgets, I’d say that the two are inseperable. The Fed “is” the market and it must be attentive to its needs.
You people have bad memories, do you remember Bernanke stating we need to prick the housing bubble (by raising interest rates) and slowly let the air out, while the rest of the economy is doing so great.
Well he raised rates and pricked the “housing bubble” and it went boom and all of us are paying for his meddling now.
He was to proud to acknowledge this last year, by lowering rates in June, July, or August.
The Fed waited way to long, and now needs to get out front of this, they waited so long that the legislators need to take action.
The only people not wanting rate reductions, are those that bet on high rates. Everyone who has been out on the street knows the dire straits the normal man or woman is experiencing.
All the Fed. Chairman is doing is again hurting the middle class and low income.
Now you can’t get a decent rate of return on your CD’S or money market funds.
It’s still just for the rich and that all.
To paraphrase the Moron, “Bernie has done a Helluva Good Job.” Actually, It’s Greenspan and Treasury that is responsible for this mess. Think of the unemployment the country would have had if the Banks and Wall St. wouldn’t have bothered with appraisers, underwriters, and all the clerks lenders wasted money on with all those obviously ridiculous loans. We wouldn’t have been in a worse situation. Not having strict government oversight of the banking system is like having pharma doing it’s own testing. Let all those Small Government abvocates learn a lesson.
Japan is talking about a 0% interest rate and that’s where we are headed too: no interest rates. What will Wall Street gamblers demand when we reach zero? Negative interest rates, i.e., we pay banks to borrow and lend? Just call me a bottomless taxpayer.
The traders on the floor of the exchange are going to find something to move the market either up or down if it is stagnant. The rate cut was just an easy reason to buy, not sell. A different day will bring a different reason to buy or sell and the traders make the money as usual. The stock market is a lousy economic barometer.
I get tired of seeing comments which say; “If the FED lowers rates we’ll have another sub-prime meltdown, so they must proceed cautiously.” Wake up!! There is no more sub-prime to melt down. That is no longer a factor.
The FED was originally designed to be a seperate entity that should not be influenced by political or social situations when making rate setting decisions. The FED should ease during economic contraction, but are we in one? We have not yet recieved enough data to determine if indeed we are in a recession. What happens if we are not and we overstimulate? Then the FED will need to raise rates to head off the biggest tax increase of all, inflation. I believe he is reacting at the moment and I hope he is right. The bigger problem is with all this easy money we have yet to reform anything with the lenders who used the low rates to get us in this mess to begin with. Are we heading back down the same road only to have a much bigger problem a couple years from now? I suspect we will.
Bernanke and the Fed are adding to higher inflation and a weaker dollar. If they want to help, they should use their “bully pulpit” to blast the administration and Congress for 7 years of fiscal irresponsibility and to blast lenders for abysmal practices. If the Fed wants a further weakened dollar to cause oil to trade at $150 per barrel and gold at $1250, then keep lowering interest rates.
Once the market has had her way with the Fed, she will find out he is impotant and throw him out. Ben cannot preserve false value indefinately, nor can he prevent the natural downward part of an economic cycle. What he can do is protect our monetary system and ensure liquidity for good investments. But how many good investments are there when the economy is in a down cycle? Better Ben preserves his dignity, and that of our financial system by keeping the money in the bank for a better day.
After reading most of the comments written thus far, I would hope that CNN forwarded them in toto to the White House, every member of Congress, and the members of the FOMC. It’s not a liquidity crisis so much as it is a leadership crisis! And the rest of the world is beginning to have its doubts confirmed by the sky-is-falling crowd in Washington DC.
A recession is preferable to a DEPRESSION! Most of us understand this as part of the normal business cycle in a capitalist economy.
What angers many of us is the “moral hazard” and cynicism with which the banks have played US all, including Mr. Bernanke, knowing that if they belly up they can sink the ship. Their behavior only confirms the maxim: Profits are privatized. Costs are socialized! Das Kapitalism!
We need to quit putting bandaids on everything an allow the market to correct itself. We got ourselves into this mess and by changing interest rates and refunding money the gov. doesn’t even have is only going to delay a recession not prevent one.
After reading the comments, I am convinced none of you have any idea what is going on.
Take a look at your own checkbook tonight. If you can balance the damn thing, you can have an opinion. If not, stop complaining about how money is spent in the country, and start worrying about yourself. Then, maybe we wouldn’t have problems like we do today.
Yippee; More free money for people to borrow and invest in risky stuff. This is just going to encourage another round of speculation and Dubyan Republican political orthodox ideology is not going to cut it no matter what the Snake Handlers tell us. We are in this fix because the Administration and their pundents on cable have been distracting the public with stuff like immigration reform, restoring the family, gay marriage. Meanwhile no one bothered to look at the 12 million per hour being spent off the books, the trade deficit not to mention the equipment the military will have to replace after we end the fiasco in Iraq
Well, first of all, doing all this Monday Morning Quarterbacking and finger pointing here isn’t going to do anyone any good anyway. We’re all in this mess, and the only thing we can do is move forward.
…For all the people who were dumb enough not to do their homework before they got suckered into a mortgage payment they couldn’t afford, I say- well, TOUGH. …Weren’t they bright enough to see that the Fed was ultimately going to raise rates, and the housing market was going to dry up??
And now, everybody is whining about it, and pointing the finger at the government.
…I think we all need to endure a small period of higher interest rates, and a moderate (gasp!) recession in order to stave off future inflation.
Think about it- which would you rather have:
1). a small period of recession where credit is hard to come by, but which will ultimately drive prices of everything back down (including both gas, milk, and yes- home prices),
OR
2). cheap credit, and soaring prices of everything- to the point where nothing will be affordable anymore??
Like the article said: Cutting interest rates is the equivalent of shoving a pacifier in a whining baby’s mouth. …Time for Bernanke to take a play from his predecessor’s playbook, and crank up the heat a notch. Then, when the recovery comes, things will have a much rosier outlook than if we continue to stay in a climate of low interest rates.
hahaha what does the Fed have to do with the mortgage crisis? did not borrowers knew about payments? did not bank knew how to lend money? is not that their business? now it is Fed’s/
does this come from an Editor at Large?
is He suffering a mortage crisis because of the Fed and interest cuts?
ABSURD!
The feds problem lies deeper than dropping intrest rates. Creating a false economy in 2002 as to the real price realestate so people can leverage equity credit on there house seemed like a good idea. Buy a car or scale up to a bigger house. And this allowed higher proprety taxes.The contract on america along with GAT was good in some ways back in the Clinton era of the 90s seemed like a good idea. We did not have fair trade with china, we flat gutted alot of industries and moved them to places around the planet.There goes the tax bace that employment here generated.But it helped the corperate bottom line. The dept is the price we pay in large to pay public service workers ie med, retierment and I know here in califirnia we pay them 90% of there pay after they retier with their retierment package.That is why CA have a 14 billion deficet. Politics with the same people in our congress and senate since the 1980s has lead to this mess. We need to have a change in the way congress and senate votes. That is a congressman vote in the 1800 was nessary to represent the people from there area. With communication much further along these days everybody is as informed as a comgressman. There for in order to protect americans from corprate or special intrests.We need use the jury system along with our congress. Each time congress goes to Washington to vote they need to take a randomley slected 12 person jury with them to help them press the write buttom yes or no. This would eliminate the good ol boy crap that has been happining,
The fed can lower the interest rate all they want.At this point it won’t matter. We need to address how America is going to handle being in this new world age that our congress voted in during the 90s.
Naturally, the Fed will now drop rates. It’s an election year. Don’t you want to feel good about your Federal Government? By the way, they are living large on the tax payer dime in Washington D.C. Don’t you want a little of that action too?
I believe it a superficial and untrue judgement, by writer. Or does she work for a bank? Interest rates are: either high or low -and not according to how many or how recent or how big last cut or increase. And further, why link the Fed to what the market wanted? they could coincide, could not they? to suggest the contrary is to err. Lost in space.
Most of your comments are out in left field. I’m no fan of the FED, but what they did kept the sheep, who pose as market traders, from following each other off the cliff, most probably causing a depression (big D).
I feel the Fed is too accommodating to Wall Street. Fed rate cuts are putting false temporary bottoms in the market, causing this shake out to take longer. Raising FNMA, FMAC, FHA & VA loan limits – not a fed action – will also extend the housing credit problem. This housing problem has its origins in home values. Appraisals need to matter. Realtors need to educate consumers on value. Lenders need to make loans based on sound borrowers credentials.
If you don’t think that speculation , not supply and demand run the oil markets, look at the price this morning (-$1.90 or so) and the price in the middle of the day (even from Friday) Speculator buy in on a rate cut! They will sell off on non-cut. It has nothing to do with what we use or not.
Bank leaders and politicians will not be content until all the risk taken on in the latest binge has been absolved or otherwise assumed and redistributed to the shoulders of taxpayers. It is a terrible shame that the Fed mandate for a healthy economy has morphed into a mandate of growth at any cost. Ponzi would be proud. In terms of the Fed being bullied, we must remember that this is a political office and Fed members are as sensitive to legacy issues as any others (witness Greenspan’s go slow policy of rate increases). Mr. Bernanke has likely come to the conclusion that he can pull out all the stops and try to restore confidence of lenders and consumers, or oversee a right-sizing of American balance sheets which would, in all likelihood, lead to a recession. Mr. Bernanke has elected the former, and we will all either be singing his praises for years to come, or otherwise lamenting them from the depths of our Japan-style asset deflation spiral.
The Fed is made up of bankers. They WANT to bail out their friends with taxpayer money and look for an excuse to do so. They do not need to be bullied. The only question is how good they are at covering up their real motives.
It’s overly absurd to suggest that the Fed started the whole mortgage crisis thing. yes, they are the ones left holding the bag. The Fed is the organization who can fix this. The Fed is the organization which made the situation worse by raising interest rates and triggering mass hysteria for everyone who has an ARM.
I say man up to where the real problem lies. Banks and their easy greedy loans. Banks decided to ease up on the loan process for their own greed. Banks should be the ones who pay to get this straight. Banks should be made to have every ARM frozen at it’s original interest rate. ARM’s should be made illegal. The Fed should have their rate below 3% until these ARM loans go away via refinancing or sale. Banks should be made to tighten their loan requirements and stop being so greedy.
Boo Hoo, banks won’t be able to make as much money. The American economy will suffer. Guess what, wake up! Our economy is in the crapper already with the massive debt that has been built up over the 40 years since the Fed has been able to have free reign on our economy.
I say bring back Kennedy and work to disband the Fed.
Jump start the economy, Get Gates, Buffett,peter kewitt, the white house, Canada, and the Govenor of Alaska to the white house and get the gas pipeline going and you won’t have to worry about the economy. the biggest project and this will take care of the housing situation
Its getting time to face reality that we have to take our medicine. Its been one long party and going to be one nasty hang over for a while. What good is it to stimulate the econome for just a little while. The tax reabets are a joke. Most are so far in debt they will use it to pay a small ammount of it off. It will be enough to buy an ipod to listen to the Fed podcast and a sandwich! Or for some a few tanks of gas and a candy bar. Hey maybe we can use it to buy more stuff from China! Isn’t that the economy we are trying to save! I know give business a tax break so they can cut more jobs and outsource the work and pocket the profit!
By lowering interest rates, Bernacke is punishing those who save and did the right things while encouraging those who bought more house than they could afford to continue buying beyond their means. People cannot seem to live or buy within their means so when they get into trouble they call on the government to bail them out from their bad choices. Businesses do the same. Our banks and other financial institutions by making bad loans have done to our economy what Bin Laden has not been able to do.
It’s all about GREED. The people always have to suffer for the stupid mistakes made by the powerful and wealthy. Corporate America is starting to run this country more and more. They never pass down any benefits to ordinary hard working people; BUT, when they do, its many months later.
absolutely not!, The Feds should have NOT waited as long as they did to move. They must make further cuts NOW in order to stop and economic abortion. This “recession” can be stopped if the MEDIA will SHUT UP!
The stimulus package is a joke.
Let me see what they are saying. If you are making more than 75K no check for you. Fine.
But whatever you are making, if you have a house mortgage we will double the conforming limit and give you a break on the interest you pay. Hmm…
If you made more than 75K and realized that that 1million house was not with in your reach, too bad… You should have bought it. We could have helped you out here.
The Fed fails to accept that recessions or economic “slowdowns” happen and in fact can be very good for the economy. However, by continuing to inject liquidity into the market without ever removing it the Fed continues to exacerbate the problem.
With the economic development and expansion worldwide that is resulting from the explosive power of the internet, I am much more concerned about the economic power of the United States in 20 years. The United States needs to trim the fat, it needs to punish an irresponsible Wall Street, it needs to stop whining about what is happening around the world, and it needs to flatten. We need to return to providing global economic leadership, not crying about the downside of market economics. Something is broken, and someone without a political or personal agenda needs to fix it. That person needs to be Mr. Bernanke, it’s his job.
Come On!! Don’t you get it? The fed is dropping the rates to keep more people from going into foreclosure. If the rates on mortgages drop low enough, people will be able to refinance their house and drop their payments, or keep them from going up. It also stimulates people who are not upside down in their houses to go out and maybe buy a new car, it is good for the economy, it is good for the country.
The Fed, Bernacke, is a wuss. The market is leading him by the nose. One wonders if Bernacke has a plan or is even up to the job. While we are at it, Greenspan needs to either keep his comments to himself or get back in the game. Sadly, it appears Bernacke is the market’s puppet.
Since the government is giving help to those people who invested in real estate as an asset class, why can’t the goverment give stock investors assistance for the stock crash of 2000- 2002?
In other words if you invest in an asset being either real estate or stocks why should the government bail any one out. You are taking a risk in an investment one investment asset to another. The government didn’t bail the stock investors out why bail out real estate?
I think Fisher’s comments are right on target. If you or I have been imprudent and can’t make our mortgage payments, we lose our homes. If banks and hedge funds take on incredibly speculative risks, they should lose their investments as well. Instead the Fed bails them out while devaluing the hard-won savings of more conservative investors.
I wish the dollar was still tied to something of value rather than hot air. To add insult to injury, it is now illegal to melt our coins to extract the value of the metal. Isn’t this the final triumph of inflation?
With the global market meltdown on Jan 21, the Fed HAD to do something so show the world markets/economies the US would take action in regard to the current situation. This does not constitute the Fed being bullied by the markets. It was necessary for its calming effect to prevent a global panic (which was already underway). Very responsible.
If the Fed lowers rates this week (Jan 30) – then it IS being bullied by the markets – specifically the US markets.
The Fed should keep rates the same and state they will take actions as necessary – not being confined to their monthly meetings.
You mention the low interest rates are what got us in this mess to begin with. NOT SO. The fact that we do not have proper regulation in the mortage market is the problem that got us in this mess. Mortgage company’s sprang up out of no where and loaned money to people that should NOT have been getting loans in the first place. In addition to the fact that the loans were based totally on rising home values, which just made matters worse. None of the major players would have been buying these outrageous loans because they never shoud have been made in the first place.
I could not agree more with what has been said before my comment here. Seems to me the people who are being bailed out here are the greedy or the ignorant souls who somehow figure there is such a thing as a ‘free lunch’ somewhere. NOT SO. Someone always pays and in this case it is we the investor whether in stocks or fixed investments who depend on them to generate that little bit of added income needed at this time in our lives ~ those of us who have worked our fannies off all our lives to accumulate something so we can expect a little return on our money to help us get by. WAKE UP AND REALIZE WHO IS REALLY GETTING THE SCREWS PUT TO THEM OVER THIS WHOLE DEAL: THOSE OF US WHO TOOK CARE OF BUSINESS IN THE FIRST PLACE AND WERE THE RESPONSIBLE ONES. Something is definitely wrong with the picture today.
He is going to make a mess of things if he keeps this up. Let those that took the big risk and made all those quick profits go broke. Evey time something happens around my house I never notice the Fed bailing me out.
in Europe we do not critisize Trichet [president of the ECB] for what he is doing or not doing; Bernenke did what he had to do [allthough a little late]; may-be the next president of the FED will do a better job – could it be Paul R. La Monica ??
The analogy to Tony Danza’s “Who’s the Boss” is the wrong one. What Bernanke needs to do is to outline the thinking he intends to guide with and then execute against it regardless of the winds of Wall Street, the Branches of Government, or John Q. Public. A better analogy would be to act like Paul Volcker who did what he thought was right despite the dire intermediate consequences it brought about.
The Federal Reserve did not lead us into the mortgage crisis and it is unlikely to lead us out of it. The Fed does not have the tools needed to help Wall Street without doing significant damage to our future. I think that Wall Street needs to “Man Up” and fix its own problems. Let the Fed do its job!
A correction has to happen at some point. The economy can’t sustain itself the way things are going. Prices are increasing ahead of salaries and people are compensating for it with credit. The credit supply needs to slowly start tightening up and push people back closer to living within their means. Salaries need to control the cost of living, not salaries + credit. It’s not going to be a fun time for many but it needs to happen. The more people are relying on credit the more unstable the economy is going to be.
I actually feel sorry for Bernake, He is the one that is going to have to pay for all the free money handing out to my Wall Street buddies Greenspan. Prices of homes reached unsastainable levels for hard working American families and now they expect Bernake to assist them. No Bernake give them their 25 basis point and then show them the bird. Let the real estate mogals cry.
If you read the news, you can do Bernanke’s job. Just follow what Wall Street wants, you’ll get it right. Maybe you will do even better than Bernanke because he missed the cut last year and he had to make it up this time. Who needs Fed? It is becoming more of a joke.
Watch Out America for the tricky stimulus package being offered. Many of us are going to be getting checks for $600, up to $1,200. Well guess what? You are only going to owe it all back to the gov.’t at the end of the tax season. Hey G.W. Bush’whacker’, Pelosi, ‘G’Reid, etc., why don’t you take your so-called stimulus package and shove it up your, you know where?
Crank up that fiddle music , for the greedy. Lets lower the rates and loan some poor folks more than they can pay again. YEP that should fix the bad wheels. When and I say when the wheels fall off this runnaway train i hope all the wall streeters and ceo’s will be laughing their butts off spending their cash on mars with their president.
Spending our way to growth and riches
didn’t some one else have this brain storm a few years ago , and is that not how we got here in the first place.
I do think that the Fed needs to take a breather from the rate cuts. The mandate of the Fed is price stability and maintaining a stable currency, not consistently placating the stock markets. Foreign investors are increasingly concerned that the United States is being financially irresponsible, at both a macro and micro level. If the Fed continues to aggressively slash interest rates, it may lose its ability to stimulate the economy and our currency may very well continue its downward path. While few people look forward to a recession, the market needs time to correct itself and to absorb the impact of (gradual?) rate cuts. Otherwise, I think we could see oil go well over the $100 mark, bringing painful inflation as well as higher taxes and interest rates, as foreign investors who finance our deficits put their money elsewhere. We need to be prudent and fiscally responsible now (sorry, Wall Street), or else we could be faced with high inflation, an even weaker currency, high unemployment, and 1970’s style stagflation.
Somewhere, there got to be the real root for the mess we are in at the moment. And, it maybe only be after we are going to experience the huge additional mess with the Credit Card depth will people begin to get used to the phrase “Living within a Budget” The temptations are always there in a capitalist society to spend and spend. But the decision is with the consumer, always.
take oil speculators and traders out of the stock market, set a price cap on oil then after maybe 6 months our economy will start to turn around..why doesn`t someone see that the price of oil is the root cause of all this mess.??
The only liquidity crises we have is that speculators can’t pay what they owe. We let financial institutions create unnecessary debt instruments and than allow them tho keep these debts off their books. Where were the regulators. The Fed should not bail these guys out.
If you think that rates need to be lowered because the market needs fluffing, just wait until you see the problems created in the economy due to inflation/devaluation of the dollar. That’s when everyone suffers.
The market is not the economy. It’s just a bunch of kids speculating on the value of corporations. The economy and pricing is what the FED needs to worry about.
“Historically low rates set the stage for this mortgage mess in the first place.”
low interest rates weren’t the cause, rather it was the greed of the lending institutions to risk loans in situations where repayment was going to be a struggle.
Okay, so let me see, I took out a Mtg. loan back in 2003 for $67K @ 5.625% interest due to my EXCELLENT CREDIT Rating. Today, I owe a balance of $17,251 as I am trying to pay the Mtg. on my condo off early, saving myself literally thousands of $$$ in interest. What the heck is wrong with this picture? Is everyone out there just plain blind? Taking jumbo Mtg.’s that you cannot even afford while working for places such as Target or WalMart? Is Money Management 101 only for us financial wizards? Come on people, it is NOT Rocket Science! You don’t need a four-year college degree from Harvard University in macro-economics to figure out how much you can afford to spend based off of your weekly, bi-monthly, or annual income. I think the main problem here is everyone wants to think they are wealthier than they actually are. It’s ALL ABOUT GREED and the I AM BETTER THAN YOU ARE MENTALITY!! If your name is not Bill Gates or Donald Trump, then what the heck are you looking at homes in excess of $250K for? You probably can’t afford it and even if you can, your job will more than likely be outsourced to some 3rd world nation that’s going to end you up in bankruptcy court / foreclosure. WAKE UP AMERICA, YOUR PERSONAL FINANCIAL RESPONSIBILITIES Should Be JUST THAT – YOUR RESPONSIBILITY, NOT OURS !! Why the Heck Should the Rest of Us Suffer for the IDIOTS OF AMERICA !! If I were a Banker and you came to me for a Loan with Poor Credit, I would LAUGH YOU Right Out of My Office! If you can’t take responsibility for your personal finances, then go rent yourself an efficiency or studio apartment some where, as you are probably too STUPID to understand what a Mtg. Loan is comprised of… I also blame Realtors for not informing their clients about such a thing known as property taxes and insurance costs. Oh sure, you might be able to afford a P&I (Principal and Interest) payment, but when you factor in Property Taxes and Insurance, OH BROTHER!! What’s WRONG WITH YOU PEOPLE!!
The Fed’s “bubble approach” to economics is more harmful than good – the internet bubble, the housing bubble, the dollar implosion (a bubble in reverse). The problem with America’s economy is that 3/4 of it is supported by consumer consumption (a lot of it credit card debt) – America is no longer a manufacturing economy but a service economy. Every day Americans are told the dollar is weaker – that has an impact upon the mood of our country. I feel the Fed no longer has control over our economy and America’s economy is in decline.
I am amazed how a FED banker can ignore the tremendous impact wall street has in the economy. There is a high percent of american owning stocks, mutual funds and equities in general. That is part of their net worth. When the stock market tumble, Athe majority of Americans feel the pain. Nowadays we have housing crisis and not much equity to get out of it, the stock market sinking, credit crunch, a lot of debt.
The FED is acting behing the yield ina reactive way curves instead of ahead of it ina proactive way driving the market to a desired state. This is why the mess is so ugly to the point where Even politicians are considering the elimination of the FED job, solely because of their performance in the current crisis.
Mr. Fisher is defending the Chair promoting a bunch of balloney for the public to swallow. They should try to be more competent instead in handling this crisis that is spreading through the whole wide world.
Of course this jerk is kow-towing to Wall Street and the savers be damned. He is as SORRY AND SPINELESS AS THE SENILE IDIOIC EGOMANIAC OLD FART GREENSPAN.
I’m not sure the author of this article knows what they’re talking about… citing rising prices of energy related products driven by market conditions as evidence of inflation is simply incorrect. Barring a thorough analysis of the effects of “wall streets” financial disparities and their economic reprocussions, it would be foolish to argue that the FOMC’s decission will not stimulate the economy as a whole. Read a book.
My opinions is “stop borrowing”. Our people borrowed too much to enjoy their life and that created this current mess in the economy. Are we going to borrow more as a country from overseas and keep our lives going on? Eventually, there will be a bigger mess for us (or our children) to face it. There is no free lunch in the world. Please educate our children in the right way and do not continue this crap. Otherwise, we’ll all going to pay back someday…
While “Helicopter Ben” whooshes out cheaper dollars via interest rate cuts, most U.S. consumers still don’t realize that CORE CPI is being used to doop them. Oh, okay, I guess because the prices of fuel, propane, food, and goat / stock feeds are skyrocketing, that’s a great reason to keep them OUT of CPI calculations to make us “feel” that inflation is not that bad. Good grief, where is Paul Volcker when you need him?
Next we need to raise the margin needed on trades. Pennies are swinging the market with “irrational exuberance”! These small margins are allowing the traders to literally ‘play’ with people’s retirement. If they lose one day, it’s easy to borrow a little and leverage heavy and with little loss of their own money.
The traders need to have to comply with sound business practices and not be allowed to affect people’s retirement savings so.
The Fed has been the source of too much economic whipsawing since 1998. Up, down, up, down.
Businesses and individuals need more interest rate stability to be able to plan effectively. It is the wild variability of rates more than the absolute levels that is the problem.
Pick a rate… 4%… and then adjust small and seldom.
Bernanke’s choices are limited. He is trying to thread the needle between planting inflation and staving off a very serious recession, or, even, a depression. The bad behavior of mortgage industry is just the tip of the iceberg. Consider the unprecedented leverage in “private equity” buyouts. Consider the shrinking number of investment grade corporations. Consider the threat of two or three large banks failing. Consider the ensuing panic that would inevitably ensue, and then it becomes easy to fathom why fed is easing. I suggest we let Bernanke do his job. Given his expertise and the arsenal of tools at his disposal, and Bernanke will bring us through successfully. Yes, inflation could be the cost, but with higher energy and commodity prices, inflation is a given anyway.
Supply and demand still drives prices more so than what the Fed does to stave off recession.
on 1 hand there saying we should borrow money at low rates…..an this is gonna help how?? we need to save more & pay off debt……….an the free money there are gonna hand out to stimulate the economy is borrowed from overseas so in the big picture more borrowing there also…….what a bunch of crap…..borrow borrow is why we are the laughing stock of world now an i ain’t smiling!!!!!!!!!
The Fed is being too reactionary, instead of proactive in its policies. Normally that is the job of the President, but Bush doesn’t have a clue of what to do. The stimulus package is all wrong with not enough money getting to the people to make a real difference. Yes we need to get some money into the hands of those who will quickly spend it, but it needs to be at least twice the $600 purposed. What is needed beyond that is a New Deal type plan to rebuild our countries infrastructure. Besides creating real jobs that pay a living wage, it is a long needed investment back into our Country. We have too long allowed our roads and bridges to deteriorate into almost third world conditions. The New Deal investment from the 1930’s is what allowed for the prosperity of the later half of the last century. We are driving up the deficit to record levels already, lets now spend on children’s tax dollars on something from which they will derive benefit.
When I read comments like “inflation is not apparent”, I wonder if the author is living on the same planet as I am. The dollar has been consistently weakening, we are running huge deficits both in trade and the federal budget and our national debt is at levels I would not have believed possible 15 years ago. We are facing huge unfunded federal liabilities in Social Security and Medicare and none of these issues seem to be of much immediate concern for the Fed. It is difficult for me to see how lowering the FF rate will help an underwater homeowner who’s home is now worth 20% less than it was in 06. They’re not going to get refinanced in any case. The same group of homeowners can’t afford their current payments, so a lesser reset at any increase will be irrelevant. Seems to me that the Fed is trying to address structural problems with temporary monetary tactics. This cannot be effective so it does make one wonder what their motive can possibly be. There will be a price to pay for this loosening and it will be expensive. Hard to imagine that there are some on this board that actually think a 5.25% FF rate was too high. I’m guessing that in a few short years, we’ll all consider that to be the “good old days”.
My recent emails to the Open Markets Comittee sum it up: “Ignore Wall Street” and “Fools all.” The latter sentiment expressed on the day the rate was dropped by 3/4 point. Wall Street got its way and still behaved badly. Meanwhile, people who depend upon savings interest to augment meager retirement funds are robbed.
too much misleading in stock financial institutions ie goldman sachs, morgan stanley etc. too much free foodstamps, free healthcare, free everything by goverment. get people to work for their benefits, too much price gouging on oil, gas by big companys, too many wars-killing our best and too many politicians who only care about getting re-elected not what is good for the country- we take from one group to give to another and the workers or retired pay the price-no other option but to go with a lower interest rate or the whole ship will sink into a depression——a vicious cylce that helps only the corporations–people should not save they should spend and have at least something to show from there work otherwise it will take ten years to just break even just like the last time they brought the market down and told you to save-save for what to be stolen every cycle
Hey bh from los angeles – can you define Wall Street? It sounds like you are talking out of your you know what. Wall Street is a marketplace buddy like the foundation of our economy. HELLO??? These markets are based upon Adam Smith’s notion of “individual hand”. Did you not read The Wealth of NAtions? I take it you didn’t and maybe you haven’t even heard of it. Take an economics clas so yu understand what you’re talking about. You sound like an idiot.
“The stock markets have already been proped up with billions. The local tax collectors are collecting taxes for over priced realestate. Bush is bankrupting the USA. I guess looking for bin Laden in afganastan or is it Iraq. Is this a free for all or what.
Maybe one of the new people running for president can fix this stuff. I am sure things will get more interesting.”
The quasi Government agency called the fed should not control the economy anyway. Nature should.
* Put our economy back on the Gold standard,
* reduce the importance of the Federal Reserve and
* allow the natural law of supply and demand exist.
But do not let a single “private” governmental system control the value creation mechanism of the US.
Too much power over a $12 Trillion economy and individual lives.
Of course Mr. Bernanke is catering to Wall Street AND at the expense of the taxpayer’s bailing the financial institutions out of their problems. This is absolutely crazy!! Just who is in charge??? In less than 90 days my Certificate of Deposit has gone from 5.50% to 4.05% and don’t even try to buy a longer CD as the rates are even lower. I hate grocery shopping1! Orange juice concentrate up 46% in 12 months. Bread up 33%. Inflation? Naw…There’s no inflation is all about business as usual. Where is Paul Volker when we need him?
As I am a foreigner I may be quite objective in this matter. For me it is quite clear that unlike what we see at the ECB, that is primarily focussed at inflation levels, the FED is acting upon what is seen at Wall Street. When you look at the drastic 0.75% rate cut and also the cuts before, they are done after Wall Street has some ‘bad’days. It is not based on economic data. Considering the fact that inflation has risen to 4.1% and the decline of the dollar of about 50% against the euro in my opinion shows that drastic lowering of the interest rate is not the way to go. You might even say that the dramatic interest cuts under Mr Greenspan in fact are the cause of the bad housing market nowadays. So in my opinion the FED is rewarding bad management of the banks, that first allow these bad mortgages and then when they run into trouble start behaving like spoiled kids and demand a helping hand.
The Gov and Fed are NOT stupid and are not being bullied. They know exactly what they are doing – getting a quick fix a the cost of our children’s future.
America is sinking in debt but the richest 1% are laughing all the way to the bank because the average Joe doesn’t have a clue.
The Fed should not be a puppet of the market. But neither should it ignore obvious problems just because the market pointed it out first and may make the Fed look bad if it appears to be reacting to the markets call.
The rate cuts are needed and should have been made earlier and more orderly(more but smaller increments). Now, no matter what the Fed does, it will look foolish. More large rate cuts make the Fed look like the market’s puppet while doing less of nothing will make the real problem worse or longer lasting.
Bottomm line is that the Fed must do a better job of anticipating the results of rate actions. It must stop raising rates earlier than it usually thinks. and must start cutting sooner than it normally thinks. Depending on economic data alone is not good enough. The words ‘lag’ and ‘lead’ must become a stronger part of the Feds approach.
The Fed is doing what it should’ve done several months ago. The only problem I see is that a bunch of idiots see this one rate cut as being bullied. The fed made mistakes and is making up for it.
Yes, the Fed needs to help out the banks and people who caused this mess or else it’ll make matters worse for all Americans.
Everyone on here needs to stop crying. If everyone starts going bankrupt things will get a lot worse. Contrary to the world wide belief, not all American have a lot of money and most retirees didn’t save enough to have to deal with this mess.
Teeaching Financial savvy to your kids? Tell them to overbuy on real estate and take an excessive amount of market risk. The Fed will assure them of an artificial bottom.
Wow! This forum is an opportunity for angry people to vent their opinions — no matter whether their opinions are grounded in reliable data or not.
First, it is a reasonable position to feel that the Fed increased rates too much a couple of years ago and waited too long to lower them. Many of us economists felt that way in the fall of 2005, and I believe actual events are verifying our feelings. Although many factors affect the impact of interest rates, usually federal funds rates of 3 to 3.5% can be considered a neutral policy for today’s circumstanceds. Therefore rates had been constricting, and we now are getting back to more neutral.
Second, the FED does not exist to bail out bankers and Wall Street, but sometimes they benefit from the aid that the FED gives to Main Street and the workers. Millions of low and moderate income people are benefiting from lower interest rates. Although those who made mistakes may be benefitting somewhat, their debt and losses are not being wiped out by the FED. Think of the WIC program we offer. We may want to let an irresponsible teenager (or young woman) face the consequences of bad decisions — and the father too! — but we even more do not want the baby to suffer. Likewise, we want to help the poor suffering from high interest rates to get relief; if that relief also helps those who made bad decisions, I think we can live with that.
Third, the main cause of today’s inflation is not low interest rates. The two main causes are (1) high growth rates of developing countries in Asia which are putting a strain the world’s supply of commodities and energy and (2) legislation that is encouraging the use of agriculture for energy rather than food. Lowering interest rates from constrictive heights to neutral levels will not significantly add to these inflation levels.
Fourth, it would be nice to approach discussions with positions that are well-researched and well-analyzed rather than a position that assumes that the powers-that-be are out to screw you.
I think it is asinine to argue against significantly lower interest rates at this point of time. Main Street is already hurting, and I think that this fictional distinction hides the fact that many blue collar shareholders also own stocks, apart from homes and mortgages on them – their wealth is being destroyed due to the apathy of this pseudo intellectual argument that we cannot have higher interest rates because of inflation. Or would we rather have a protracted rececession like Japan had in the late 80s, when too little was done too late by way of fiscal stimuulation. Is it not about time that we wake up to the reality that if we do not pull out all the stops presently, we are risking 1929 all over again.
Pervez, Vancouver – Canada
I am so happy to see this viewpoint expressed. Yes, I think Wall Street has grown way to bit for it’s britches. It’s like the spoiled child dictating to the parents where to go, what to buy, etc.
Wall Street has just one goal…maximize individual wealth. The Fed needs to take the reigns in and look at the macro picture of overall economic health (deal with government dept) and consumer well being (unemployment, inflation etc.)
Enough of these Wall Street television pundits espousing what needs to be done, their greed and excess has lead us all to the current situation we are in. Like Bush himself…I think we need to look at the track record of these decision makers and decide if their ‘expert’ opinions should simply be discounted.
Feds action is really to rob the savers and give them to the wall street. With a low interest rate, the savers will be more willing to take their money to the wall street so people like Mozilo will be able to rob them one more time. Get it?
Realistically, I do not believe that they have done enough. They need to drop the rates completely and they also need to begin regulating the banks. Banks have had an advantage of keeping the rates at a high even though the Feds have lowered interest rates. What should occur is that the Feds should actually apply a tax increase or a penalty to banks who do not lower the rates following the Feds rate drops and adjust the current mortgages and credit card rates for those individuas who are struggling but are paying within the 30 day timeframe. This will try to force individuals to pay their debts while receiving a rate that allows them to maintain their properties. To the same individuals no additional credit should be extended. Banks have the luxury of changing the rates at their whim instead of realistically working with individuals. The excuses they use are “your loan is a private loan” – what loan isn’t? Each one is private based on REITs and Mutual funds? Your credit is low.. How many people have high credit scores but have no credit?? Many… How many actually do make their payments but due to the amount of debt their scores are low..the rating system needs an overhaul as do the banks. The scores should be based on those who are trying to make their payments even if they are working with consolidators. They should be awarded that they are working out their credit problems. Do they really think that we are all in the dark? Bernanke – lower the rates all the way and present a penalty clause to the businesses who do not work with the millions who are in trouble… maybe we will finally have a solution that works for all! Maybe our economy will finally get back on track. And…the Feds will be able to get back from business what they have taken for many years..the right amount of taxes.
The comment made earlier by a gentleman stated that we should not worry about inflation b/c production is declining. Must I remind him that inflation isn’t measured by a decline in GDP. Rather is is defined as a sustained increase in the general price level. Basic aggregate suply and aggregate demand models will show that inflation can de caused by cost-push and demand-pull. I believe here with rising costs of oil and therefore costs of production, inflation can very well occur at the same time demand and total spending are decreasing. With this in mind, let’s go back, if you are old enough or at least have studied economic history, to the oil shock of the late seventies. Rising producer costs and falling demand – known as stagflation. We are in the midsts of that era but at an even greater scale. Let the markets adjust, the Fed should stand close softening the drop and trying to prevent the duration of it. Maybe Americans watch too much TV and don’t read enough. They don’t want to think for themselves, but would rather watch someone on TV to tell them what is happening. The problem too is that most comments I have been reading here are so congested with errors in reasoning, its a wonder that Socrates himself isn’t rolling over in his grave at how inductive we Americans draw conclusions. Our thinking is completely illogical.
The Fed is not being “bullied by” Wall Street. It is in “collusion with” Wall Street to seize individual wealth and sovreignty for the benefit of the Washington Economic Establishment (WEE).
Echoeing my exact sentiment, the FED has lost all credibility long time ago when they started listening to Wall Street and started the first of the rate cuts. I hope Ben Bernanke will be around to look at his mess later on and try to fix it. Offcourse, we middle-class people will suffer for all the mistakes him and his board are committing, but isn’t that always the case. The middle-class always pay the price for our nation’s mistakes. Reminds me of someone who is leading this govt and had cost us 1/2 trillion dollars in cash and still doesn’t own up for his mistakes. I guess, stupidity flows from the top in this govt.
Honest citizens who pay taxes and don’t get the tax benifits of the rich end up paying everytime. I didn’t get huge bonus checks at the end of each year for the past 5 yrs to go and buy ferrari’s when all wall street was celebarting their ingenious plans. Now, I dont see wall street lining up outside exotic car show-rooms neither did they loose their jobs. They still got their complete pay packages. Where is the justice in this.
I think I understand Ben’s thought when he decides that stupidity on part of Wall Street should not pull the economy into a recession and he is trying to protect the people in the end, but in this scenario, I think he is handing the keys to the govt’s vault to Wall Street.
What do I know, I am just a simple ordinary guy forced to sit back and robbed in broad daylight by a govt which is being governed by a capilistic few.
We should have held rates constant for the last 8 months. They would still be historically low. Debt is money. More debt is more money, equal eventual inflation. Further drops will make world go to the Euro for world standard currency sooner than later. Then look out below for the dollar. Rewarding the irresponsible use of liquidity buy adding more liquidity, how stupid. Our government, the Fed, the media, they are all so stupid blind to the moment vs the truth.
the market is the voice of consumer sentiment and will reflect consumer confidence which will drive the economy up or down. the fed is reactng to this market force and not the stock market. jeoki, kailua hawaii
I think he is being politically bullied to the extent that he refuses to deal with the real problem and that is the $9,100,000,000,000 DEBT!This debt is obscene,ridiculous, and worst of all,IMMORAL.This debt is causing alot of our problems and our politicians need to understand this.
YES, THEY ARE PUSHING BERNANKE AROUND. WHAT THEY DON’T REALIZE IS THAT SOME PEOPLE HAVE TO LIVE OFF THE INTEREST THEY GET FROM CD’S ETC, BY CUTTING THE RATE SOME OF US DON’T HAVE ENOUGH MONEY TO LIVE ON AND SALARIES ARE JUST NOT CUTTING IT. THE COST OF LIVING HAS SKY ROCKETED, BUT SALARIES HAVE NOT. YOU CAN’T SPEND WHAT YOU DON’T HAVE, SO THEY ARE BASICALLY DEFEATING THE PURPOSE BY CUTTING RATES AGAIN. I KNOW WHAT IT WILL DO TO ME SO I CAN IMAGINE FOR OTHERS.
Yes, the Fed is apparently being bullied by Wall St. The problem is, the Fed has to keep the President & Congress happy, they have to keep the American people happy, and the American people can’t see two inches past their nose when it comes to money issues.
“If the DOW drops, then we must be in a recession.” Just look at the polls conducted that ask random people (the vast majority of whom cannot even balance their checkbook, let alone know anything about the economics) what they think of the state of the economy.
When the Fed rate gets close to zero in an effort to keep the DOW up, then what? Then it will be time for me to cash out…
So the banks loaned money to risky barrowers, for realestate that was twice the price it should have been.
The stock markets have already been proped up with billions. The local tax collectors are collecting taxes for over priced realestate. Bush is bankrupting the USA. I guess looking for bin Laden in afganastan or is it Iraq. Is this a free for all or what.
Maybe one of the new people running for president can fix this stuff. I am sure things will get more interesting.
I do not know, and neither does anyone else here, if the markets are
‘bullying” Ben. But what is clear is that Ben got thrown into a worldwind mess and is trying to calm the public and to prevent a financial crisis. So everyone else should take note and remember that too is a function of the Fed. As for the rate cuts, I do not agree with the frequency or the severity. We must again remember that the Fed’s primary concerns are: longterm price and interest-rate stability, and economic growth. Short-term fluctuations in the stock markets and the supply of money is not something the Fed should be too concerned with. The Fed should be looking further down the road like the rest of us and we should all quit getting hung up on these short-run fluctuations in these variables. The main problem here is that Americans are too short-sided b/c we all take our standard of living for granted. There are a very few who actually are educated enough to understand that short-run swings are normal and that we should not succumb to their changes. Business cycles are a part of market-based economies and the sooner that society realizes this, we will stop trying to prevent them from happening. We cannot control the ups and downs, merely the duration, severity, and frequesncy for which they occur.
“Man up” ? This is supposed to be a serious article re: the Fed, economy and the markets? The writer should be ashamed to call himself a journalist. this kind of piece belongs on “Entertainment Weekly”. Oh, BTW, Wall Street is one of many barometers concerning the economy/inflation. The Federal Reserve is SUPPOSED to pay attention to it.
The real problem isn’t low rates it is low production, when you stop producing products to sell and only buy products you eventually have to borrow to keep your habits. when you run out of the ability to borrow you are where we are. Until we get to the point where we can produce and sell products things will not get better. The good news is that this will happen when we can produce goods at a cheaper rate then our competition ie China and India. With their economies and growing middle class that day is coming sooner than later.
Have we all forgotten the 9/11 WTC disaster already? The Fed cut rates to quell panic after the terrorist attacks, which were coupled with recessionary economics. That’s why rates were cut. And the housing boom helped support our economy when nothing else would. And now there is panic again–by homeowners, not Wall Street. Wall Street knows Main Street better than anyone. Stocks are responding to a massive slowdown in the economy and a housing meltdown after a well-deserved and needed boom. Should we abandon the homeowner? Abandon the banks? Abandon Wall Street? Why not abandon capitalism altogether, then? Low interest rates, rebates, incentives, and other support measures to help citizens, Wall Street, and Main Street are empathic moves, not destructive. I say thank you Wall Street, thank you Government, thank you Fed for understanding the needs of our country when our country is in need of support.
Raise the Interest Rates to 10%? LOL… I LOVE IT !! Leave it up to the conservative GOP delegates and pretty soon we’re going to be owned by China, South Korea, and the rest of the Asian continent…The US Gov.’t is selling us out…
The Fed caved to Wall Street. It really needs to be going the other way and raising rates to hold off inflation. It was the drop of the dollar and rise of energy and food costs that were the true causation of this slowdown. The foreclosures are a mere symptom of the over extended personal credit that this country carries.
There has to be some blood letting before the underlying dynamic of overextended finances can be fixed. Lowering rates will only make the eventual bloodletting needed that much worse.
Absotely not, he has lowered enough already. Let the ediots that caused this problem suffer the consequences.
People that depend on interest bareing should not pay for the banking/finance industry lax & unwise past decisions on shaky loans.
Is the Fed being bullied into cutting rates…?
NO – they are only following the pathetic entitlement mentality that is so pervasive in this country; thinking that the gov’t should “provide” all things to all people, at all times…
I am entitled to food…
I am entitled to housing…
I am entitled to utilities…
I am entitled to a 100%+ home loan, regardless that I don’t have a job…
I am entitled to get a bail-out of my mortgage when I default on it…
and I am entitled to a rate cut…
cause if I don’t, I’ll scream and then hold my breath till I turn blue, and I’ll post my opinion on some blog…
Have many times must the Fed cut rates…
sung to “Blowin’ in the Wind”…
Joe
Sam from NJ must be trader. If he had a lick of common sense he’d see what is actually going on: bailing out almost criminal practices by his pals on the Street. Another rate drop and we’ll be back here dealing with inflation or worse yet, stagflation. It would be unwise to lower rates again. Heck, they just dropped them last week!
Subprime loans and low rates didn’t cause this. Giving ARMSs to subprime borrowers at rates lower than they should have been for the risk involved did. Builders continuing to build despite the slowdown in sales and the credit crunch didn’t help matters.
But the question is how to get out of it. Personally I think a small dose of inflation would do wonders for the average consumer and their debt as long as wages can keep up. But I do agree. The market and the people have now realized they can control the fed by adjusting their spending habits. Not good for the future.
The Fed has failed us, again. The Fed policy has made a fool of savers for much too long. Why save when the Fed just plain raids savings. Why not just blow in what you have instead of letting the Feds give it to non savers to blow in? Robbing frugal Paul and giving it to numbskull Peters is what got us into this money problem. Pouring our treasury into the Bush Iraqi rathole don’t help none neither.
Yes, the Fed chairman is too “sissy” to stand up to do what’s right for the economy. Other central banks in the world look to the big picture, but the US Fed just follow the whims and fancies of the Stock market. Shame on you, Bernake.
Rats playing chicken on a sinking ship(that would be YOU Wall Street), seeing who can stay on the longest. For those espousing the wonders of market efficiency (and I believe they are reasonably so), time for YOU to ‘man up’ and stop pleading for government intervention. Face it, the average joe is in too deep for an interest rate cut to encourage his consumption.
Pretty soon it won’t matter, since these policies will cause reduced consumption anyway (read inflation).
Even worse, world markets are going to lose confidence in the Fed as a global leader, since they have only to look to major indices to predict its behavior. Pathetic.
Even doctors don’t give candy until after the shots. Time for the medicine.
Bernanke needs to raise the interest to 10 percent ,Our money is too cheap ,This would stop all of this crap that we have now ,
This article is a piece of junk, probably motivated to help those who have short positions.
FED made a few mistakes in the past (e.g., increasing rates to chase imaginary inflation precipitating the credit crisis, not fully understanding the sub-prime mess, and not quickly reducing rates to face the economic downturn), but the current moves to reduce rates are the correct moves.
The core inflation is low (and economic slowdown will tame inflation further), so there is no reason why FED shouldn’t reduce rates to stabilize the slumping housing market and give a boost to the economy.
I think they can go down to 3% w/o causing inflation, w/o reigniting speculative real estate flipping, and boosting GDP growth to more reasonable level.
The stock market needs easy money and is pushing Ben. The media, owned by the stock market is also pushing for the next Pres to continue easy money. No longer is this a country where we elect the best public servant, it’s a country where we elect the best politician. This will continue to it’s inevitable end.
‘First by inflation, then by deflation, our children and grandchildren will be left homeless and in the streets.’ Thomas Jefferson, 1802.
Yes the Fed is owned by wall street and always bows to traders and large money interest. The dollar value is shrinking fast, inflation is much higher than stated(check fuel, food prices etc.), and low interest caused the mess we are in now.
Some people say those that saved money to earn interest to retire on should have saved more and not depended on the interest for earnings. I believe that savers should be able to receive a reasonable interest rate on their savings that would keep up with inflation and taxes paid on the interest. At this time savers are loosing money.
The Fed does not care about savings only wall street.
Greenspan went to work for the money boys, and so will Bernake.
So what is wrong with a recession and deflation. Americans whine because they have not saved and have been trained like Pavlov’s dogs to expect the FED (a private bank given the right to create money)to bail them out.
Too bad so many drank the cool aid.
everyone makes me laugh…..the real problem happened way back in 2002-2003-2004…..when the markets were on fire and rates were not raised then…the markets were allowed to run out of control……now we’ve hit payback time and there is nothing anyone can do but sit through payback……. the leaders in this country are being paid way to much PERIOD….thats’ why they don’t notice the little guy…..its a shame whats been allowed to the young and elderly in this country….time we find some rightous leaders…..
I have a master in econ and I’m very worried by the current rate cuts of the Fed. Anyone that has studied econ history knows that when the Fed forgets its main goal (inflation), very bad things can happen.
When will the conservatives stop hyperventilating over FDR? How can he even be considered a part of this problem given the growth of our economy following his presidency? The real problem is in the $9 Trillion debt rung up by the past 3 Republican administrations to buy votes from a public who won’t have to pick up the tab. Our children, grandchildren and great-grandchildren will do that for us.
Yes, the market is trying to bully Ben. Especially the bond traders – not a happy day for them if they can’t hedge the right direction – they would rather bully Ben. What the nation needs is lower interest rates, real jobs and an increase in take home earnings. Then we can worry about inflation. One household earner can no longer feed a family – it takes a village.
The FED can not dictate policy for the economy. Stock markets are only daily snap shots of the world economy. People need to stop knee jerk reactions to markets and stick to long term plans. What the FED chairman needs to do is tell the US President and Congress is to balance the budget. I hope the economy slows enough so we can only purchase a minimum of imported goods, hurt a little, and watch the rest of the global economies go to hell and a hand basket.
Fed’s are being bullied by stock market. The problem is not too little liquidity, but too much liquidity. You only have to look at record oil and food prices to see that. Only a blind person would miss that. And using inflation meaures, which ignore food and gasoline, are just a joke.
everybody needs to remember, if rates are being lowered this means that people will than refinance homes, cars, etc. and lower rates, The big question what do most Americans do when they save money on something?????
the Answer: With the money they save on Refinancing one of there big ticket items, they go out and re-invest in our economy!!! Keep on lowering, lets get our ecomony where it once was…STRONG..
AND THAN
Let elect a president who does not have ties in the oil industry…. Wow can you imagine somebody who would somehow push for regulation of oil prices….. what a thing…
No – Bernake did what he had to do to keep things on an even keel until after the housing market settles down. Monday morning quarterbacking his moves in desparate times doesn’t help. Let the man do what he has been trained to do and leave him alone. Take another decrease on interest so everyone can refinance and then let the rates ride higher next year!
Much of the problems being experienced by the Fed and the economy are directly related to banks pushing people over the fiscal edge by raising interest rates.
Wall Street isn’t bullying the Fed, the banks and mortgage industry are!
The recent Fed cuts will have little consumer effect so long as banks are allowed to raise credit card rates with no reason other than that they can as they are allowed to define the parameters of such increases. What is actually happening is that banks are more interested in profit and shareholder satisfaction than serving the public.
For every Fed cut banks have already turned the screws on the credit card and mortgage consumer by preemtively raising interest rates, some to over thirty percent, in order to shore up their decreasing profits.
Until these self-fulfilling practices are banned or someone in the financial industry wakes up and sees how destructive they are, the economy will not improve as more and more consumers will be pushed into default and backruptcy.
Yes, the Fed is being bullied by the markets. These market players always make money in good and bad times. They bet with and against the Fed. When was the last time your broker said “I won’t collect a commission because the economy is in recession?”
Add in the rogue traders and the financial industry has the keys to the bank vault! This mess was brought on by the same doom sayers…Real estate is the new medium of money. Did anyone’s pay check go up by 50% a year the way real estate prices went up? No…if anything companies continued to be bought, sold and restructured with employees paying the price with our jobs!
If the Fed does not start thinking about the future, we are in for a financial mess bigger than this one 2 to 3 years down the road!
Eric from Davenport, IA… You are probably too young to remember FDR and you are probably very uneducated… George W. Bush is doing for this great land of hours what Herbert Hoover did during his administration, which is making the wealthy, ‘wealthier’, and the poor, ready to stand in a soup line…Don’t go on attacking FDR… He was probably one of the BEST US Leaders this country ever knew…All the Republicans can talk about nowadays is how we don’t want to socialize medicine as FDR did with Social Security… Well my fellow Republicans, if the USA is the GREATEST Country on the face of this earth, why are we one of only a select few that doesn’t offer their citizens some form of Universal Health Care coverage? Oh yeah, this country is GREAT when you have a bunch of BLIND IDIOTS running it…’nuff said…
Leave the rate at one level and let it sit so an investor can plan without having to worry about a rollacoaster ride. The problem wasn’t caused by Mr. Ben, and he won’t be able to fix it by diddling with rates. The rich and powerful have a inflexible grip on the steering wheel and are not about to sacrifice their perceived ’self-interest’.
I wish people in this country would learn from their past mistakes. We are in this mess due to rate cuts started by Greenspan. Don’t we ever learn?
Again I ask where are all the auditors who are responsible for identifying these risks on a company’s books? For the past couple of years they have ratched up their fees because of all the extra work that they have to do to prevent off balance sheet accounts form misreprsenting a company’s performance.
Where’s the extra manhours going?
The Fed is simply doing its usual support of Republican administrations in a presidential election year. If a Democrat were in office, there would be no rate cut, no consideration of market restrictions on mortgages. The invisible hand only is allowed to work against Democrats every four years.
If your neighbor is in financial trouble its a recession. If you are, its a depression. Obviously the writer of this article has a good job and things are going well for his familey. Pretty MIOPIC if you ask me.
Most of you are incorrect about the low interest rate.
The low interest rates DID NOT cause the housing bubble.
Sub prime loans and very lax lending standards caused the housing bubble.
There is a huge difference here.
The people to blame for the housing bubble are greedy lenders, banks, corrupt appraisers and the like. The checks and balances system was ignored and circumvented. No one in congress or in financial institutions asked the simple question “Why is real estate going up so fast?”
Lower rates will increase inflation (duh!) and with prices already spiraling out of control the segment hurt the most will be retirees. Of course with boomers getting ready to retire, this is going to contribute yet another huge problem: seniors who have worked and saved for thier entire lives will not be able to afford food and heat. On the other hand, those of use who are young, employed, and deeply in debt will benefit greatly from inflation. The result: a socialized democracy (and even bigger problems).
The writer here has to brush up on his Eco. 101. There is huge DEFLATION in Housing, Stocks, and the money supply. As the problem grows the Fed should react by increasing the money supply to stave off a deflationary depression or recession. This kind of deflation cannot be corrected by the market.
I am a 92-Year Old LIBERAL Democrat and proud of it. As one of your postings indicate below, we are heading right back into the days of Herbert Hoover’s administration when Roy Archibald Young was the Chairman of the Federal Reserve Board. You people are much too young to know what life was like back in the late 1920’s & early 1930’s. Believe me when I tell you, it was not pretty! We are progressively heading backwards instead of forward… I think part of the problem in the USA today is people are allowing religion to influence their decision on who’s best to take this country into the next decade… If that’s not the DUMMEST thing I’ve ever heard! Do you really believe religion plays a role in how a candidate is going to run this country? I really don’t understand whatever happened to the days we had intelligent leaders in the USA… Pretty soon we’re going to be a third world nation. It’s REALLY SAD…
Ben Bernacke needs to man-up and NOT cut rates any further cause another aggressive rate cut won’t begin to cure what ails us. Furthermore, Mr. Ben should advise Larry Kudlow and his cast of characters to take a chill-pill and recognize that further rate cuts won’t fix the credit woes of those that borrowed more than the asset is worth! The math just won’t add-up!!!
Of course he’s bowing to the markets.
He’ll give them another 50bps this week (though he shouldn’t) because if he does not, the market will crash and we can’t have that! Especially in an election year!
Besides, there’s no inflation, right? At least that’s what the core inflation rate says (minus food and energy).
I don’t know anyone that has to eat or drive or heat their home, do you?
There are plenty of market forces at work to address inflation. The housing bubble has burst. The fact that house prices are longer inflating will put enough pressure on the economy to contract consumer spending as the equity ATM would eventually be tapped out. Hopefully, by moving rates down as fast as they have, housing prices will stablize somewhere around 10% below where they were twoyears ago. With that the market will clear out the lion’s share of speculators and unqualified buyers without penalizing the rest of the economy to the point of suffering a deep and potentially protracted recession. I do believe the Fed should stay a few steps behind the market in order to the ensure data supports the emoition. Which they have done -painfully in some cases.
Howdy,
Utter nonsense. The low interest rates had absolutely nothing to do with mortgage meltdown.
The culprit was greed, greed, greed and more greed.
These irresponsible bankers and wall streeters need to feel some real pain, but they never will. To them, having their year-end bonus cut from one million to $750,000 is real pain.
If BB and Co. were caving in to a demand that would actually help the situation, I would grant it as good governance if it is caving into cry babies or not.
.
But the coming crisis (I think out and out depression) is a result of too many Americans going along with our leaders telling us we can borrow our way to real wealth. Like it or not, the American “consumer” is out of funds. And since our so called economy depends on increasing consumer spending, there is no stopping the thud back to reality.
.
But now, thanks to a panicky Fed Reserve, we can add extra inflation to our situation.
.
It makes the markets go up though.
Yes, the Fed has always been too close to Wall Street, and not so with the small investor.
The Fed should be pushing for a special prosecutor to investigate the fraud perpetrated by the big bank and brokers.
It’s really academic. Prudent financial management by individuals through corporations and financial institutions, dictates that each undertake reasonable and continuing risk assessement based on tolerance and then foster a strategy which includes providing a safety net. What we are now seeing are the effects of greed run amok. I happen to be a disciplined individual, live below my means, save aggressively, have little debt. Unfortunately I am being pummeled by the effects of those who overextended, from individuals who needed the Hummer financed with an equity line to sit in the driveway of a house which was unaffordable when purchased and yet used to draw down even more debt with which to finance such purchases, to the hedge funds who figured it all wrong.
No the Fed should NOT react to the lack of discipline by extending rate increases which will create more problems down the road. All should understand the concept of living within means; this can include carefully structured debt of course, but not wild and irrational borrowing.
First of all, “man up” is a childish, Gen X expression. Secondly, the Fed risks nothing but cutting rates further now. All they would need to do is raise rates slowly and steadily in the future when the economy and the markets are strong. The Fed’s “job” is really the easiest in the world.
The Fed’s moves have been too little, too late. The economy shouldn’t be viewed as some research project of Bernanke’s. Little room for error with the sharp downturn, the Fed has no choice but to continue slashing rates. How low can they go?
The fed was concerned about the world market meltdown, not just the Wall Street drop. I think the drop in rates is a good step, as we are just down to where we were at 2 years ago. So I don’t see what the problem is.
It is incorrect to state that the mortgage bust was caused by historically l;ow rates. The majority of the bust was caused by mortgage fraud.
Someone actually had the nerve to claim we need another FDR to get out of this mess.
I’m so sick of the uneducated voters in this country. FDR is the cause of this mess.
Yoiu can’t ignore market principles forever.
The market is controlled by traders and analysts and investment bankers. The fed doesn’t have a choice. If they don’t lower rates, the market will simply sell off and all the analysts will preach doom and gloom and we’ll sink into a depression. The market always gets what it wants, at least that’s the way it is when you have a weak president and a weak federal reserve chairman. Until we get real leadership in Washington…etc., etc..
And so my fellow Americans, ask NOT how the Federal Reserve and Ol’ Glory can ’screw’ you, ask what you can do to ’screw’ the Fed.’s and Ol’ Glory…Isn’t that what it’s all about in this country? (i.e. – screwing each other royally?)
THE FED ISN’T BEING PUSHED BY THE STOCK MARKET! THIS IS FOOLISH AND SHORTSIGHTED ECONOMIC THOUGHT. STOCK MARKETS ARE JUST THE THERMOMETERS OF AN ECONOMY. ECON-101. FORMIDABLE ECONOMIC ISSUES CLOUD THE USA ECONOMY, AND OTHERS. IT IS SILLY TO ASSUME THE FED IS WATCHING ONLY THE THERMOMETER, IF AT ALL. ONE ONLY NEEDS TO LEAVE A WALL STREET HIGHRISE TO FEEL THE DARK AND COOLING ECONOMIC WEATHER. IT IS PAST TIME FOR GREATER RATE CUTS AND NEW U.S. POLICY TO CORRECT WHAT THE FED AND POLITICIANS ALREADY SCREWED UP!
I have to a agree with some of the comments made. Why should we have to bail out banks that make bad loan investments. This whole thing is going to be a big mess, and at the end guess who is going to pay for it “not the Fed” and surley not those in “Washington”.
yes Bernanke is a wimp, but why are all the retiree’s complaining just as much as wall street. They should have saved more in their savings account and not depended on living off intrest created from it. The US has to get to a reality check and I welcome it in the form of a recession.
The Fed was way behind the curve. Should have cut aggressively 6 months ago. UST 10 year below 4% and UST Bills in the low 3’s while the Fed stubbornly left Funds at almost 5%??
There’s a credit crunch going on and the Fed was DRAINING bank reserves all summer to keep Funds artificially high. No growth in bank reserves for 2 years. Then they HAD to move, finally.
While I agree that the Fed should stop cutting interest rates, saying that low interest rates caused this mess is ludicrious. What caused the housing mess was subprime loans given at teaser rates to people with awful credit with little or no money down. 2 years ago 1 out of every 5 loans was a subprime loan. THAT is the problem, not the mortgage interest rates.
Everyone I know has disputed why the FED began to lower the rates; it was only to appease the big investment houses, the theives at the mortgage brokers, and the banks. Stocks were/are doing fine. Let the financials take their punishment for their reckless activitiess.
The FED should NOT reduce the interest rates this week! Wait until March, and see if Wall Street has “gotten its act together”.
If the financial related entities are still floundering, maybe they will learn its not nice to mess with honest investors.
Perhaps Mr. La Monica who wrote this article or some other talented soul can send these coments to Mr. Bernanke. I tried for 3 days last week to send him my negative opinion on his rate cut policies. The “contact us” on the Federal Reserve web site never works. All I could ever get was “Error”. How convenient for them.
Of course it is; the Fed, like many others today, wants to have a world in which absolutely nobody takes a hit. We will, sooner or later, find out that that is not the world we live in. Most of us probably know that already, right?
There is no doubt in my mind that the Fed is being bullied. The federal reserve has taken the role of bailing out Wall Street and completely ignoring main street. Does the Fed need to rescue these casino gamblers who make irresponsible decisions?. Does the Fed ever think of those people whoose very lives depend on a fixed income?. I dont think so. I dont understand this brand of capitalism. This only encourages bad financial behaviour. I am sure Mr. Larry Kudlow and his creed must be partying heavily right now.
I have said it before and I will say it again. Our countrys future is being controlled by a bunch of Wall Street wimps.
Unrealistically cheap interest rates got us where we are now. They say that people need to save. Why in the devil would people save when all it does is to provide cheap money for weak banks to loan out and make a killing.
20 years age a 6% fixed interest rate was what provided people the opportunity to have the house of their dreams. Now the out of control American consumer refinances every year to get cash.
Its time for the Federal Reserve to tell consumers and banks and Wall Street to suck it up and have fiscal responsibility.
If we dont staighten out this mess now, our grandkids will be living in a place called USOPEC
Now is the time!!!! Do we have the guts to take a stand???
Of course the fed is being bullied – that goes without saying and has been the m.o. since Alan decided he wanted to be loved and started to regularly prop up the market. Main street? Who are they in the eyes of Wall Street and more recently the Fed? It is pathetic and unsettling to those who have been responsible all these years and are now looking at their dollar tanking.
MOreover, folks are saying the fed can afford to cut because inflation has been at bay. Well the reality is that inflation has not been at bay. What has been at bay is the implausibility of the CPI. It is a complete and utter joke. Say ‘hedonics’ anyone.
Ben, wake-up or move out. Does anyone have Volcker’s phone number?
Greenspan created the fianancial mess we’re now in via his interest rate cuts; and now Bernanke is repeating the mistakes. All this will lead to a Great Depression combined with high unemployment and hyperinflation. We can thank GW Bush and his Republican friends for this mess!!
Absolutely. I think John nailed it, only link missing was how they have used the media to do it. Watch CNBC (or don’t if you can avoid it) at 6am, Joe Kernan is a know-nothing who can only repeat the chorus of his Wall Street buds, the same one’s John spoke of…
The market absolutely controls the Fed, they have zero backbone. I suspect the Fed is also under some political pressures to assist the market. The current administration does not want this market meltdown happening on their watch.
Ben Bernanke is an incompetent bumbler – just like the guy who picked him for the job.
Last week’s 75 basis point cut was a perfect example. When the Asian and European markets tumbled last week as a consequence of a French bank dumping positions, Old Bumbling Ben wet his finger, put it in the air and immediately knew: “It’s a sign! It’s a sign! The recession is here!”
Meanwhile, the ECB, probably already aware of the causes of the market tumbling, was adamant in not to lowering its key rate.
Good time to pull out of the markets.
Mark is right….We are governed by a bunch of morons. ‘W’ has had seven years to learn to pronounce ‘nuclear’. That child was left behind. (I’m a Republican)
Let the gamblers lose and don’t try to get the rest of us to pay through inflation for their erroneous ways. At the rate of inflation interest rates should be going up not down.
The Fed’s rapid cuts could seriously
weaken the Dollar and cause serious
capital outflows. Such an outflow
could actually hinder a real estate
recovery in the long run and cause
havoc on the stock market even in the
short run.
Yes – the Fed is dancing to Wall Street’s tune, with the goal of protecting as many Republicans as possible from losing their seats in Congress and perserving some romote hope of retaining the Presidency.
When all this is done.. perhaps bush will award freedom medals..as it worked to recognize “CIA’s excellent job”, WMD”s and all?
This is simply the final pay back by the WH and buds for the ROI that got them there. To give this welfare to the incompetents that caused it, by those that were there and aided it..were it you or I, we’d be jailed under about 50 charges under RICO. SO let’s split the annual “Atta boy brownie award” to Paulson and Fed Bank Chairs..they earned it..then give them scholarship for HS courses in economics and money. It seems DC is totally “FEMAsized”?
Absolutley. They are destroying the balance between risk and reward. Adjusting home prices is unfortunate, for sure, but we need to learn a lesson and not look for an artifical ‘boost’ with a rate cut. It is perpetuating what caused this mess in the first place. Honest, responsible people are getting hurt because the purchasing power of the dollar they have saved is dwindling with every rate cut.
Rate cuts do nothing for the average person. It enriches the banks and other “big money” organizations. Our economy is in a collapse that will eclipse 1929. You don’t have to have big degrees to see things can not possibly continue. How can the average family income be around $45,000 and the average house at $259,000. The simple math is house prices are almost triple what they should be to be affordable. I think people are smarter than to believe houses could continue to go despite stagnant wages.
Here’s teh teeling part in this article:
“NEW YORK (CNNMoney.com) — “This was a sad day for Bernanke,” a bond fund manager told me the day after the Federal Reserve cut interest rates by an aggressive half-point back in September.”
Bond funds boom when rates are high. Screw teh rest of teh economy, this guy wants his cake while teh peasants starve.
We had bond fund managers whine for years about rates being too low for them to make their killing.
Tough. Better rates go back to reasonable levels given teh amount of information available to lenders and fat cat bond traders go hungry than we feed the fat cat bond traders and choke the economy instead.
Yes, it’s obvious. Now the prudent individuals who know how to live within their means are suffering from inflation. They’re all a bunch of lyers and are sucking money from the little guys and small businesses. WISE UP AMERICA.
Bernanke is definitely being bullied by wall street heavy-weights. But overall it is not as bad as it seem for short term.
I think at this moment Bernanke and Bush administration have no other option, but to provide symptomatic treatment to this economy, so that Pres. George Bush can exit in Jan 2009 in a dignified manner. There is no indication that Bernanke and Bush Administration have any serious intention to repair the economy and stock market for now at least.
The short sighted policies of cutting the interest rate and stimulus plan, can only delay the inevitable downturn so maybe couple of years, by which time President Bush will be well into his retirement.
Good luck to the incoming President, because he/she will need a lot of it thanks to such short sighted policies.
FEMA had Michael D. Brown. The Fed has Bernanke.
The first seemed to spend an inordinate amount of his (detached) time keeping the wrinkles out of his white, starched shirts. The second seems to spend an inordinate amount of time combing his beard.
Every time we have an unfunded war we have a huge increase in inflation 5 years down the track. It’s payback time GWB!
The Fed is trying to do the impossible – prevent inflation and keep wall street happy. Who pays? Either way its the little guys!
The new mandate to help the GREEDY bankers is our Dear Leader tell Bernanke what to do. Bush NEVER appoints anyone unless he is sure they will be a “loyalist”. Passing out Chinese money to the public is yet another dumb idea. Will the checks be denominated in YAUN to reduce costs??
Never drop the rate below 4.5. Making a bad problem worse by doing it. I agreed with some rate cuts but this is absurd. Pad it a little bit but afterwards let them take their medicine for their stupidity. Who bails us out when we default on our mortgage?
The Fed is killing off the middle class through inflation for the sake of rich america.
Doesnt help that our government now loves inflation because we have such a large national debt ($9 Trillion dollars!!). So are the govt and the fed purposefully letting inflation go higher?
Also the Fed changed the inflation equation in 1990. If you use the equation in effect in the 1980s when inflation reached 14% – you’d find we are at 11% now!
The gov’t changed the equation to hide what is going on – and they argue they took out volatile things like oil and food. Thank god my family can live off hard drives and chinese made tupperware.
Health insurance premiums, gasoline, gold, food, winter heating, etc., etc., etc. – We need another FDR in office to bail us out of this mess…Unfortunately, in this country, everyone’s literally blinded by the GOP… Does anyone really believe the conservative GOP’s really care about your well-being? They are pouring millions, if NOT billions of dollars making the corporate CEO giants wealthier and the middle-class…no… wait just a second…The middle class? What’s that? The GREAT DEPRESSION, round two, it’s comin’, fast & furiously…
I support rate cuts which should have started earlier last year.
The mortgage mess was created by Wall Street whom delivered Junk mortgage bonds – sold on greed.
Alternative mortgage products are no longer available since the investor market has backed out. The mortgage industry has cleaned up it’s act going forward – which started last August.
In actuality – the Fed went too far with rate hikes and waited too long for rate cuts.
Anyone not in agreement must rent vs own thier home and has little in the way of unsecured credit.
Rate cuts and a package to stimulate the economy is key to lessen/shorten our current/forecasted recession.
Would not be surprised to see Fed rate down to 1.5% within the next 18 months.
The Fed caused this whole thing by not lowering their high rates last year during the begining of the down turn in housing. Some stood to profit hansomely from high rates and are upset the Fed has finally grasp a clue.
Sadly, it appears that Wall Street has their man inside the Fed now. They already had their man inside the White House. These rate cuts ARE going to come back to bite us in about two years. They are politically motivated, that’s plain to see. One must wonder where Bernanke studied economics (or if he forgot what he leared). It’s economics 101 that if the Fed puts too much money into the markets too quickly, inflation is the inevitable result. This is especially true if the markets are already over-valued, as ours are. We already have severe inflationary pressures and in reality, inflation at the consumer level is already climbing quickly. Bernanke has not proven himself a fiscally responsible Fed chair. The next president should move to replace him as quickly as possible.
Someone states below that the Fed chair is responsible for making the economy grow and to prevent recessions. This is not true. The Fed controls the money supply so that the economy will remain stable. Market forces determine if the economy will grow or shrink. Funny how faith-based free-marketeers want the government to stay our of their markets up to the point where they make a complete mess of them.
The Fed is caring only for the immediate quarter, like many of the CEOs of US companies. There seems to be absolutely no regard for the future, cutting rates this low is a huge mistake, how could all these well educated economists make such a mistake. Obviously a pawn of wall St. Pathetic
Sure, it is so obvious that Fed has been a sidekick of the market brad. It is one of human natures that the whinning baby can never be satisfied. Pity Bernanke, at first look he seems to be a tough guy, however, he has a really soft spot for the whinning market, that is rather unfortunate for every decent investors. Personally I think there should be NO bail-out for those irresponsible money spenders. They have to take the consequences from bad decisions. Why should responsible people pay more to clean up the other party’s mess?! it is unfair.
Yes, Fed is being bullied by the bunch of speculators who managed to convince the whole world that they are the economy itself:
“Heck with the people and their money, let this bubble grow again, let this party never end !!!”
THE FED IN ITS RUSH TO HELP WALL STREET IS JUST MAKING THE PROBLEM WORSE. HEY KIDS LETS DRINK MORE COOL AID. MAYBE BEN COULD GET ANGELO MOZILLO TO START GIVING OUT NINJA LOANS AGAIN. NO INCOME NO JOB NO ASSETS BUT HEY HOW MUCH DO YOU NEED ???
who ends up buying these funds anyway at that discount rate? overseas that’s who. the relief comes short of any domestic borrowers. Fed auctions should be eliminated or structured to allow for domestic banks only
I always thought the Fed.’s primary responsibility was to adjust the Federal Funds rate accordingly in an effort to stave off inflation. Now am I just mis-interpreting something? Fuel, groceries, winter-heating bills are WAY UP! Eventually, everything you want to purchase is going to soar through the roof. Is the Fed. really concerned about inflation or does it solely allow the markets to dictate what direction it should take? It seems to me we’re heading in the same direction as we headed into back in the late 1970’s… According to my elderly relatives, it seems like we’re on the brink of another 1929…
Every rate cut improves the profit margins of the big banks. The banks were the ones who were finally getting their comeuppance for the all the foolish lending, and now our federal government is bailing them out and giving them a free pass. I’m looking forward to getting all those subprime loan invitations again.
The Fed is owner by super rich bankers. Banks have been making absurdly leveraged risky speculations on futures and only God knows what else, illustrated by the Societie General “fraudulent” trader.
These rich boys simply phone their boy Ben and tell him to lower the interest rate to help continue the gambling.
The rich bankers need low interest rates to borrow cheaper for their LBO’s and to leverage their gambling addictions.
Ben’s the Enabler.
If the feds really wanted to help, the would tell bush and congress that they would ONLY lower the interest rate, if they would both cut in half the deficit. That means IMMEADIATE spending cuts or possibly even revoking some of W’s tax cuts. IOW, the feds should go back to the same deal that helped make the 90’s the go-go days.
With the Fed giving away the store and our ‘leadership’ all singing the “Buy now, PAY later!” mantra is it any wonder why other markets are skittish. Remember Bernanke is also the same man who has euphemistically called for “adjustments” to Social Security and Medicare in testimony before Congress. Does anyone believe he’s talking about increases? Undermining the longterm stability of the economy to bailout Wall Street now is certainly one way of making these “adjustments” a certainty once this self inflicted liqudity crisis subsides and the Street demands fiscal discipline by the Federal government. And then once again ‘Gentle Ben’ will cave into the Street and do its bidding in Congress!
Wall street caused the problem, not the Fed, so large Fed rate adjustments are not the proper solution. The Fed needs to keep it’s eye on Main street, not Wall street – despite all the noise they make there. Tab, Arizona
Looking back a couple of years, given the inflation and growth figures, I belive an increase to 5.5% was overdone about 1 percentage point. To an extent this is what threw us into the mortgage mess to the extent we are in today. The inflation is caused by worldwide commodity demand, and jobs will not be transferred back to the USA until other currencys grow against ours (and that, unfortunately, means inflation on imported items). That, the Fed can not, and should not, do anything about. Therefore, I believe our economy will run well at interest rates around 3.5 to 4.5 %.
The influenece Wall Street and other global investors has on the FED is clearly demonstrated in last weeks rate cuts. I believe falling assets prices (housing and now stocks) are critical to consumer confidence. Not only are consumers seeing their homes’ equity disappear, but many consumers are also receiving their quaterly brokerage and 401K statements and the principle balances on these accounts are lower or the returns are not what they have been. The significant vanishing of equity makes consumers feel pinched and not as wealthy.
Americans are used to entitlement. Therefore, when their equity is threatened, they expect the government to respond and bail them out. For me, this is too “New Deal era” and monetray policy should not be used for bail outs. Furthermore, the FED has to repsond to the markets, otherwise, the economy risks this disminishing sentiment brought about by market entitlement.
WHAAAHH !! WHAAAHH !! The Stock Market’eers’ are nothing but a BIG BUNCH of Cry Babies and Whiners !! You want to talk about whether Ben Bernanke and the Fed.’s are being bullied ?? Absolutely YES !! How are individuals like my 83-Year Old Father supposed to survive on such dismal interest rates, especially when his Certificate of Deposit Accounts are coming up for renewal ?? Why is it always all about the stock markets ?? If you are investing in stocks for the long-haul, then you need to be prepared to take some losses…Either way, you’ll still come out ahead in the long-run, but for 83-Year Old parents that cannot afford to take any further risks, Certificate of Deposit Accounts are the only way to go…So how in the world is an 83-Year Old individual supposed to survive on 3.00% interest? It’s ALL ABOUT CORPORATE GREED and POLITICS, that’s all it is… My 83-Year Old Father is NOT going to invest in the stock markets any longer… He cannot afford too at the risk of losing the ’shirt off his back…’
No. The fed was behind the curve and is trying to catch up now. Certainly the fed should be careful not to overdo and unleash inflation, but inflation is not apparent at this time. Low rates did not create the housing bubble, poor lending decisions and crazy mortgage products did. If everyone had stuck to the basic types of products and bought only the house they could afford at those rates, we’d be fine right now. If historically low rates on a fixed rate mortgage or very straightforward ARM products aren’t enough to get you in a house, you’re not ready for that house.
Bernanke is Wall St’s bunny. Wall St cries cut rates to help us and he does. Wait six to nine months when you have a raging stock market with inflation at 8-10%. Inflation can not be tamed as quickly as Wall St. Short term fix for a small few investors/bankers resulting in economic failure for all.
Its the “lenders of money” who are responsible, and should be held accountable for the credit mess the world is in. Minds must be applied creatively to find or design more tools to curb credit and inflation DONT BLAME THE FED
Bernanke is pathetic. His nose was dragged by Wall Street or a crying baby like the author well said.
If he runs out all his rate cut ammunition, what is he going to do if the economy is still bad? Those bankers, investors should bear the risk, NOT all of us ordinary citizens.
I think most of you are stupid and only worried about your own investments and not the investments of others nor the country. His job is to make sure the country is always growing and not heading into recession. If it wasn’t a big concern the president wouldn’t be given us a rebate check.
It’s easy, Bernanke is not Greenspan…
He needs to stop trying to be like him and show his own leadership otherwise he’s sunk.
The Fed’s job is not to rescue the financial markets. These will take care of themselves. What the Fed should be doing is keeping inflation in check. But that will keep getting harder with every interest rate cut.
your right on the money. Bernanke is folding to the cry babies on wall street at the expense of the majority.Older people on fix incomes and money markets and Cd are going to take a hit.
The Fed is definitely being bullied by Wall Street, there is no question about it. And so far, they have been more than accommodating. Future policy decisions will be required to “undo” the mess they are creating. Inflation is exploding in this country and so far they have turned a blind eye. We are in a recession, but is that all bad? I believe that a recession is needed occasionally to provide a dose of reality. You can’t keep the economy performing like a pounding freight train. Even a freight train needs a little down time for maintenance now and then.
I think the feds have it right, cut the interest rates now and support the people in pain as when things are good they are good at shafting us all, thats what got us in this mess! Take a look at how many interest rate rises we have had, just because things are going well why dont we slow things down? Well they did that.
Greed is the route of all evil!!! On Ya Feds…Little Aussie bloke in pain beacuse of your greed all the way over here in Australia.
Yes for sure. Ben is being led by the markets and the few speculators riding their money on the stock market. I think he should be more sensible and lead the market instead being led by the market.
US fin. markets need a leader.
What it is time for, is people to realize that Joe six pack can not afford a $400,000 house. Nothing the fed does changes that, unless Bankers become insane and start giving money away to people who can’t afford it…again…
The band-aids are postponing the inevitable. And Wall street has had it’s way with monetary policy for the last 6 months. The low interest rates, combined with extremely poor mortgage market oversigh has led to a 6 year credit buying binge in this country. At some point we have to live on earnings, not credit.
No – the Fed knows there are issues more serious than market fluctuations and that ongoing rate cuts are necessary to see us through those issues. Waiting unil the next meeting and making a large cut would have have more of a negative connotation than the inter-meeting cut that was made recently. Wall Street is flattering itself if it thinks it can bully the Fed.
Of course Bernanke is being bullied by the whiners in the market. He is a wimp. He is also killing those of us who are retired and living off of interest on our small savings.
-
All credit cards are not created equal. From 7.2% to cash back, 6 great deals. More -
With the stimulus underway and unemployment rising, economic leaders weigh in. More -
Thanks to sinking home prices, these 5 homebuyers were able to score deals in prime areas. More -
A new top-of-the-line luxury sedan -- the finishing touch on a troubled brand's make-over. More -
Nissan, GM and Ford are placing their bets in the high-stakes game of electric driving. More -
Not even ultra-dapper President Obama could help Hartmarx, the Chicago-
based clothing maker. More
do not cut rates..fix ambac