Not sure what all you folks are whinging about!
So the Fed has cut interest rates – it had to to save your job you know! I know I’ve got direct access to my savings and they’re earning 8% per year or more! ING Bank – way to go.
Stop the whinging, get creative and get out there.
Oops, they did it again, those slimes at the Federal Reserve (Bald Headed Bernanke) and the Treasury Secretary, Lurch Paulson, that’s a pair that a full house couldn’t beat. What I would like to know is, can they cut the Fed Funds rate below zero, knowing these guys they will probably find a way to do just that. Hey senior citizens have you checked your fixed income accounts lately, they jerks are stealing from us and giving it to the Wall Street Barons in the form of lower interest rates, but I guess everyone and his brother and sister know that. I contact my Senators and Congressmen to no avail they seem to think the sun rises and sets on the Federal Reserves ass. What in the heck are we to do, we who are on fixed income investments and depend on the interest to supplement us from going to the poor house. I really need help understanding this whole mess, we are told we don’t save enough in this country and when we try to save, along comes the Federal Reserve and cuts interest rates to the bone so it really isn’t worth saving at all, maybe that is there plan all along, please help me understand.
“And payments on credit cards and home loans should also go down.” (Paul La Monica, 17 March 2008)
Yeah, if you have the “luck of the Irish.” (Happy St. Patrick’s Day, by the way.) But while I see interest rates declining for banks, I have seen them only rising for consumer loans and credit cards this past several years.
Oh, right, there is one other interest rate that has gone down: the one on my bank savings accounts (less than 1% the last time I looked). No wonder Suzie Orman tells people who are in a financial pickle to pay down credit cards first. Saving money in a bank doesn’t get you very far nowadays.
The Feds can manipulate finances all day long for those in power, but it sure doesn’t filter down to the common man. St. Patrick’s Day looks like the only time most people get to experience being around something green.
As a responsible guy in my 20s I just wish I had rushed out and loaned myself to the gills so I could recieve the bailouts that are coming.
I think we all need to step back and look at what the Fed is using as a stimulus tool. The interest rate was an inflationary control not a kick start for the economy. We are all to blame for this the Fed for making money easy to get, the mortgage lenders for laxing their terms and financing people that had no business for being given that much money.
Finally the people actually taking some of these loans. How stupid did you have to be to think that 115% loan was ever a good idea? I am an idiot when it comes to money and I know that if your taking out more than your home is worth your already in trouble and shouldn’t be doing this.
This is one of the best columns I have read lately besides the one regarding walking away from you house or not if you cannot pay. Everthing in the column was exactly what I am thinking. Since all these rate cuts, the only interest rate that has changed (gone down) is my savings, cd’s and mutual/retirement funds. Not a house, car, credit card or any other bill I have tied to an interest rate has gone down even 1/100th of a percent. You know it is funny how when key rates spike the creditors, merchants and whatever who hold accounts can quickly adjust for the new higher rates, but when it is the other way around, the changes are slow to none. Bailout, what kind of crap is this. I don’t give a rats ??? about that stuff. What next. Seems as long as they are making money and profits its ok but when they take a loss, mostly their own doing “we” (the governement) has to step in and help. Its almost like there is a special gaurantee they will make money. When we invest, they tell you in their perspectice, that you can loose money, the same should apply to them especially when most of the time when we loose money it isn’t because we tried some new and hard to understand business practice that failed on us. I am just sick of the whole thing. The only ones who are suffering are the ones who are trying and continue to do the right things like understand their credit, make good financial decisions and save. What am i really saving when I put 10000 dollars in a mutual fund and after a year I got a cool 10073, but with the same bank I may have gone over my check writing limit(not bounced and check) but simply wrote 1 or 2 two many a couple of times in the year and that 73 just became -28 because the penalties with that was 50 dollars each. With all these rate changes, and I have decent credit (I got a 30 fixed rate mortgage at 5.97% over 2 years ago, and today still with a pretty good credit score the best I can hope for is 5.75,,,,,,oh but the key rates have dropped almost 3 percent. At the same time I had a cd from over 5 years ago with yield of almost 4% but since the key rates have dropped and I do mean recently, I only get .73% which changed (down) every single time the fed rates changed and was immediate. Bottom line, they are all greedy and I don’t care 2 cents about em’…..Everyday people need help so they can save a little for their future, children and older years which will not be assisted by any governments help. We need to save something now because we will be on our own when this is all said and done but we cant because we have banking, corporate and legal theft and this other big one they us alot called inflation for basic needs such as fuel, food, clothing, electricity, and even water..and maybe coming to a town near your,,,,air….
The Fed and the US government is stealing value from responsible Americans in order to save special interest corporations and speculators. The value of the dollar has fallen by more than a third against world currencies, while the goverment continues to lower interest rates and print billions of excess dollars; therefore stealing directly from those who have savings. The housing bubble is a direct result of the easy money policy of the fed which supposedly prevented a recession, but in reality encouraged and promoted speculative buying of housing, and the housing bubble. The supposed missed recession now appears as a catastrophic collapse of the speculative markets with resulting inflation and recession together.
The case can be made either way. If BS were to declare bankruptcy and its holdings liquidated at marked-to-market prices which turned out to be near worthless, then it would be difficult for other investment banks to affirm that their holdings are worth what they claim. This could exacerbate a further downward spiral of writedowns and bank failures caused by solvency and credit issues, which significantly damages the economy and would affect everyone with further job losses and reduced lending.
However, morally it is becoming increasingly difficult for Wall Street to justify how it does business. It takes heavy risks based on enormous amounts of leverage, pays its risk-takers massive salaries and bonuses, and then expects the Fed to bail it out with taxpayer money when things inevitably go wrong. I worked on Wall Street and speak from an insider’s perspective. I, like a lot of people, am tired of paying for large corporations’ mistakes. They privatize profit during the good years and then socialize loss when things collapse. Who loses? All the small guys. Who goes home richer? The already rich.
Somehow as I drive to the gas station to get $3+ per gasoline to get to work my sympathy for the Bear-Sterns shareholders evaporated. They should have reined in the financial cowboys who trashed their company.
Andrew Lutz is learning the way the real economy works. I scratch your back and you scratch mine; to hell with everyone else.
Wonder what the Fed is not telling us about the economy.
Greenspan is the wizard of Oz reincarnated and Kansas knows about pompous airbag frauds like him.
All this bailout is doing is prolonging the pain and causing the market to bounce up and down like a yoyo. Why not just let the market go where it will? Isn’t that what a free economy is all about? Every time the interest rate is cut I take a hit on my modest savings account. The Fed is going to drive a lot of people into poverty to bail out Wall Street. It isn’t right, and it is about time the Fed gets that message.
The Bush administration and the Fed have responded to our looming financial catastrophe by, in essence, bailing out (ultimately at taxpayer expense) the same financial institutions and their executives who are most culpable for the sub prime scam and crisis. This bailout is all-to-typical of the Bush administration and is also, as investor Jim Rogers put it, “socialism for the rich”. In the real free-market that lassie-faire capitalists can only dream of, these bankrupt firms would, rather should be allowed to fail.
The Fed giving billions to these firms will do nothing but ensure that the execs walk away with their golden parachutes intact. It won’t stop more large financial institutions from going under nor the perilous decline of our currency. And it won’t stop the credit liquidity paralysis that will soon enough suffocate our business markets. Furthermore, the current government policy does nothing to ameliorate the underlying causes of our economic crises: the substantial deflation of real estate, inexorable decline of real wages, excessive debt-drive consumption, and reckless investing by an unregulated “shadow financial system”.
I don’t understand how people are to feel confident and happy to spend their money in this environment. I am in my 20’s and I’ve been living within my means and saving since I got out of college, even when it means doing without. My only loans could be paid back tomorrow, but I have to play the game of building credit. Most of the money I spend goes to rent, food and transportation. When all of these things increase in price, my savings rate decreases and my raise is immediately eaten by the increase in prices for these items, why would I want to spend more? As the rates are cut, my situation continues to deteriorate, reiterating this feeling. From what I can gather, I did nothing wrong, but my government is making me pay for something I didn’t cause and had enough sense to keep my hands out of. Continuing this rate cut approach is only making things worse from my perspective. I never benefited from this mess with a new house or million dollar bonus. Why am I being punished for their decisions in a free market?
I believe the blame here is widespread. It was not just the wall street folks who caused this problem. It was also those who aquired mortgages they could not pay. It was also the fools who were willing to feed a market where real estate inflated at astronomical rates. The only just course of action here is to let the chips fall where they may. Stop trying to help these people, big and small, by making those of us who did not get involved in that madness pay the price.
Bottom line, the dance is over, it is time to pay the band. Let those who danced pay. Leave the rest of us alone.
Hey, these big investment firms have given me a great idea! When I graduate with my Ph.D. I am going to start my own investment banking firm. I am then going to have that investment firm buy my $100K in student loans with no collateral. Then I’ll securitize those loans, sell them to someone else, and walk away. Or better yet, if I can’t sell them, Ol’ Bernake can come to my rescue. How sweet. I won’t have to be responsible at all!!
In the meantime, my savings account interest rate has crapped out. My food costs are up. My stipend doesn’t go as far. Neither does my car, given the weak dollar’s effect on gasoline prices.
Must be nice to have the government on your side. Unfortunately, for most Americans, it isn’t.
My wife and I have a 30 year fixed-rate mortgage and our student loans were just paid off. Through living frugally, we’ve been able to build a small savings nestegg and it’s been getting 4% or more in interest for two years through online savings accounts and CD’s.
Bernanke’s cuts are slaughtering any interest earnings and the insuing inflation will make mincemeat out of all the hard work we’ve put into saving.
It’s a shame that Bernanke is willing to throw millions of Americans to the wolves in an effort to help a few of his billionaire banking buddies buy one more Ferrari.
Do YOU ever wonder how much Bush and Cheney (Delay, Rove et al) have profited from this obscenity of Neo-Con RICO? Wonder how much their NET WORTH increased thru ignorance, stupidity and politicking? Come November, you could vent your wrath, or, you can continue to lick your Party’s boots. No incumbent should survive your bullet-BALLOT!!!
And the electorate (voters and those too ’smart’ to vote!)remains BRAIN-DEAD…electing the same old party stooges that enrich themselves and Wall Street at our expense. That’s it, your Party toadies, lick the boot and kiss the…proverbial…like THEY really care about y-o-u!!!
What happened to the free market system?
The Feds are running real scared because they should have caught this thing in the bud and didn’t!
I understand that the FED is trying to avert a recession and lower rates might save the day. But, seeing that we are now entering the baby boom generation…might this plan not backfire? You have stressed income for many years. By cutting the FFs and thereby lowering rates offered to savers (already low on savings) it would seem this will have a negative effect. There are an estimated 70M baby boomers. For each $1m in savings at 5% equates to 50k in disposable income. For each 100bps cut u clip discretionary spending by $10k. I understand there is alot of moving parts….but this rate cutting and stimulus package seems hell bent on jump starting consumption rather then on investment. Havent we seen this before?
For 25 years, a Span of Green has stretched from Wall Street to Silicon Valley. But all good things must come to an end. So while Mr. Greenspan plays the piano for wife Andrea Mitchell, the world burns.
I say, put the interest rate at 6% and let the chips fall. Maybe a good shake out, deep recession is the best pill to take? The US cannot keep spending and borrowing to get out of trouble.
The truth is, that Mr. B. is trying to stop an earthquake that Greenspan should have stopped years ago.
Greenspan kills me! He tries to undermine everything Bernanke is doing – yet in truth B. is doing some very sound things – unfortunately he is having to mop up Greenspans failure to act against the mortgage company when all this began, years ago.
Greenspans arrogance as he tries to imply he could or would do something different now, falls on very deaf ears – he had his opportunity, now Mr. B gets all the flak.
This is about censorship vs. language concerns. One of you tried posting several times a message that had some language in there that we didn’t want to include. That’s the only reason the posts were not put up on this page. That person’s last post did go up because the post did not contain any objectionable language. We welcome all opinions. Just keep the language clean. Thanks.
PRL
The rate cuts are killing my savings. Millions of us, who use common sense and didn’t get in debt over our heads are being chained to the post and whipped for the crimes of wall street. Washington needs to wake up NOW!!! The rate cuts are hurting everyone but the wall street bankers
The banks are like insurance companies. If too many people get into accidents, they raise the cost of the insurance for everyone.
Eventhough the FED has lowered rates, there are too many defaults (accidents) and the bank must raise rates for everyone. As more defaults, more mortgage rate hikes. The plus side is that housing prices should fall (sellers probably don’t think that is a plus
Please Bernake stop the madness. Is it your intention to completely destory the Dollar. If so cut rates again and watch it collapse. Currency has been the backbone of the Ameican investment realm. One more hit to the dollar may cuase irreparable damgage to our currency market. As a middle class American I need to see someone come up with a viable plan to fix this mess befroe I start spending, and investing more.
Sad But True Facts Clinton balanced the budget Bushwhacker blew it We owe money to China and keep borrowing Now China is raising Its’ outsourcing fees to the US OPEC preys on a weakened US economy while Bushwhacker’s personal profits rise Mexico has the 2nd largest deposit of oil yet they owe America BILLIONS Hugo Chavis plots against US with new buddy and fashion expert Mahmoud Ahmadinejad US Forces depleted. Too thin for “real” coverage Wall Street won’t say recession CNN and every other tabloid writer promotes Gloom & Doom
Keep it up and no one will be able to afford cable or your lousy newspapers. Did I miss anything?
CNN and CENSORSHIP
This is the third time I’ve posted and been removed.
Sad But True Facts
Clinton balanced the budget,Bushwhacker blew it, We owe money to China and keep borrowing, China is raising Its’ outsourcing fees to the US, OPEC preys on a weakened US economy while Bush’s personal profits rise, Mexico has the 2nd largest deposit of oil yet they owe America BILLIONS, Hugo Chavis plots against US with new buddy and fashion expert Mahmoud Ahmadinejad (That’s Achhhhh-I-NEED-A JOB), US Forces depleted. Too thin for “real” coverage Wall Street won’t admit recession and finally, CNN and every other tabloid writer promotes Gloom & Doom.
Keep it up and no one will be able to afford cable or your lousy newspapers.
Did I miss anything?
One thing for certain is that the guys who called the shots and created this mess are enjoying their bank accounts and the gov’t bail out. We have a president that only seems to help those who created this mess but it’s the little people who are suffering, losing their homes, and have nowhere to turn to. This country continues to reward the powerful. Isn’t is strange that in 3rd world countries, where gov’t is run by the rich (laws also protect the rich), they must be laughing at us because we have now sunk to 3rd world corruption.
Don’t people understand what happened last Monday. The Fed could not sell 180 billion dollars of Treasury Bills to anyone. They then sugar coated it and said they were lending 200 billion to banks in exchange for worthless subprime mortgages. What they are hoping for is to have the banks sell the T-bills this month to 401k plans and then use that money to buy back the sub-prime mortgages.
This means the government can no longer count on anyone buying T-bills what about next month when another 180 or 200 billion T-bills come due and interest and principle needs to be paid? The government is beyond broke they cann’t get anyone to loan them money.
Don’t people understand what is going here the U.S. has been broke for thirty years now the world creditors are telling us the party is over and they are not going to loan to us anymore.
This is going to make the Great Depression look like an economic expansion.
People don’t understand equity bubbles. They believe that a good thing suddenly goews mysteriously wrong and the bubble bursts. This could not be further from the truth. Equity bubbles are the rsult of careful calculation. Something of values is bought rolled up, traded around until the price reaches a point until the cost of an equity instrument exceeds its actual value. When this happens, the crafters of the bubble bail, leaving unwitting investors to suffer the losses. They use greed to drive the process. The architects of the current bubble have long since pulled out, taking huge fortunes as their haul. In the dot-com boom, the suckers were silly day traders, hoping to get rich quick. The amazing thing about the housing bubble is that it is investment bankers that got snookered. This is what happens when you let a bunch of kid MBAs run the show.
The Fed is either incompetent, as evidenced by the falling dollar and soaring commodities as they cut rates, or sees things are a lot worse than they are letting on.
Both options are incredibly scary.
The answer is simple: they are hurting the economy. We don’t have to speculate about this, we have historical precedent. Look back at the 1970s. The Fed is attempting to use the same policies that failed then.
The Fed should close and audit all financial instituttions they loan money to. Those that are fundamentally sound remain in business. Those that aren’t, should be closed and their stable assets sold off in a bidding processes.
In conjunction with this, banks should be required to significantly tightened consumer credit standards, so that America will be encouraged to save instead of spend on easy and vbery expensive credit. This will reduce consumer spending, of course, but consumer spending is much too large a part of our economy anyway. To make up for reductions in consumer spending, businesses will increase business investment. It will become better to move manufacuring and other jobs back onshore. In order for this to work, the government must renegotiate trade agreements so that the trade deficit is substantially reduced. (Sorry China). This doesn’t require protectionism or isolationism, but only real fair trade.
It is un American to bail out investment firms. High risk invetments made allot of money for allot of people. The risk is comming home to roost so let these same people fail flat on their faces. The Tresury Secretery was once CEO of Goldman Sacks and it looks like Goldman Sacks will fail now to without a bail out. We cannot let him bail out his broke friends!
As with most this whole fiasco does not make sense to me. Why is it that people who practice creative accounting, cheat the public and lie about their earnings get to keep their money and are bailed out by the fed when honest hard working americas are footing the bill. Is it just me or is there something fundamentally wrong with this picture.
Seems that “old crackpot” Congressman Paul knew what he was talking about all along. Maybe return to the gold standard isn’t the answer, but stable currency obviously requires something better than an “air standard” which seems to be the only one the Fed uses.
Um, it’s hurting!?!
There’s my 2 cents worth (.02 US Dollar = 0.01298 Euro current market value 3/17/08).
WELL ITS NICE TO SEE THAT THE FED IS ACCEPTING FOR COLATERAL ALL THE BAD DEBT THAT THESE BANKS HAVE ACCUMULATED. SO WHEN THEY DEFAULT WHO GETS STUCK WITH THE BILL GEE.. THE TAXPAYER. THE ONLY THING IS THAT THE 800 POUND GORILLA IS NOW THE 8000 POUND GORILLA SO MR. JIM JONES BERNANKE WITH HIS COOL AID TRYING TO HELP IS JUST KILLING OFF MORE OF HIS FLOCK. WITH MORE HELP LIKE THIS THERE WON’T BE MUCH OF AN ECONOMY LEFT TO SAVE.
Like a typical economist, Spock glosses over the fact that the “players” are playing with other people’s money – not theirs! In economic speak this would be deemed an “externality” – not even factored into the economic equation employed by them – that it doesn’t make any difference!
In the short-term cutting rates is merely an attempt to put a finger in the dike and buy more time by ostensibly providing more liquidity. In the longterm this devaluation of the $ means lower standards of living for most of US.
As one individual has already astutely observed though, this “free market” works only one way – profits are privatized and costs are socialized by design. It is a wholesale transfer of wealth to the few… a type of capital accumulation that will be invested in international markets. But all the costs – bankruptcy, home foreclosure, unemployment, inflation, etc. will be borne by US. Das Kapitalism! Has anyone ever contemplated a viable alternative? Until we do get used to it!
I’m not sure where Spock in Miami got his info
“Unlike most of the commentators below, I get it. Maybe that’s because I’m part economist.”
But this is exactly how Bush’s aids explained the problem to him this last weekend… He finally got it on the secound go around….
Are Fed rate cuts and the Bear Stearns bailout helping or hurting the economy? The effects of the rate cuts in a market where credit markets are tight essentially only helps the banks who can borrow money directly from the Fed or those who can use the money abroad in countries with a higher interest rate. Their actions serve to only delay the inevitable and further destablilize the economy. For the majority of hard working conservative Americans, the Fed’s actions amount to a knife in the back. On the premise of helping America, their actions have decreased the value of the dollar, increased the cost of commodities to all time highs, resulted in lower savings interest rates, higher bond prices leading to increased cost of long term rates (higher mortgage costs), etc. To what end? To help irresponsible and greedy financial institutions, housing sector, housing speculators, and home owners who can’t take responsibility for their actions. This is the end result of Greenspan and Bernanke’s attempt to manipulate the economy. Let those who caused the financial doldrums bear the cost. If these same institutions feel they can still pay their under-performing CEOs tens or hundreds of millions of dollars after taking billions in losses, let them suffer the consequences and liquidate the entity as an example. Should the gov’t step in, then it should levy a heavy cost for the support as in the case of the Chrysler Bailout of the 80s where the fed received shares or warrants in Chrysler which it then sold at a substantial profit. Its time for the government to quit plundering the majority of hard working middle class Americans to prevent or lessen the self inflicted woes of the irresponsible affluent who normally decry government intervention and the ignorant who should never have been provided loans in any form because of their financial immaturity.
Megan, San Ramon CA: By the way, how do I let our government know this is bogous, and they need to stop the charade of devaluing my savings. Is there a petition out there?
Answer: Vote Libertarian and say no to both corrupt big government parties. We need to stand up to the status quo.
Spock_rhp, Miami, FL: As an economist, you must know what moral hazard is…. Presumably you also know what M3 is and what its link to inflation is. And you presumably know the effects of inflation on economic growth.
When are we going to ban together and take our money and power back?
This country was founded upon these principles – as true today as it was back then. While we’re not dealing with the British Monarchy taxing us without representation…it’s the corporate entities and illegal agencies raping us now instead. It took much less to spark action way back then, will it take Chinese ownership of America to wake us up?
The President says we all need to save more as the corner stone of a healthy US economy. So why not give savers a tax break and promote saving. Might suggest a tax break something like we had many years ago for those who carried a balance on the credit card. Promote savings rather then bailout incompetent Wall Street and corporate managers. In the long term savings will fix the US economy and strengthen the dollar.
What we are living through now is a result of a crisis in confidence.
How can anyone trust our business and political leaders when they tell us everything is under control. We have heard that from the likes of Enron, Countrywide and Bear Stearns just before they have cost our investments and retirements hunderds of billions of dollars and untold heartache.
Sadly, the only thing I trust now is a piece of gold or silver. The dollar may as well portray an image of Charles Ponzi.
America, we have been high-jacked by Corporate interests, bankers and lobbyists.
Do the right thing in November – vote for whomever is not currently in office unless you know they are doing an absolutely great job for the people!
We need to tke our country back from the robber-barons!
The banks gambled and won lots of money in the beginning. Like a bad Vegas bet they became greedier. They lost. Now they have to pay back their markers. They cannot. Too bad. The casino owner gives them a bigger loan and finances it by charging admission to the casino and increasing food and drink in the restaurants. Now the regular patron is paying for the gambler.
Gambler…Bears Stearns/patrons….. taxpayer/casino owner….Ben…King pin Bush
Has anyone noticed how wonderfully helpful the Fed has been for the average American? I bought a home in early January before all the drastic, emergency rate cuts were given out. Since that time, the Fed rate has dropped nearly 2%. I got my mortgage rate at 5.5%, which was terrific, but now government lending rates are lower and no one can get a mortgage for that cheap anymore? Why is that?
I understand that there is a credit crunch and that money/credit is apparently tight. But when did this become the average consumers fault. We see people defaulting on mortgages they clearly couldnt afford, who just walk away. Banks raise rates/fees that they charge on current mortgages and accounts, yet are unwilling to increase their savings/401K/IRA account earnings. Something seems a little wrong here.
Either I fell off the short-bus or we really are in a bad place. It seems as though we are in a lose-lose situation and that banks, retailers, foreign governments are trying to squeeze every last (worthless) dime out of us. Clearly market dynamics are not working anymore and what I think should happen should be a focus back on the consumer, not Wall Street. When was the last time you heard anything about the Fed concentrating on the average American, not some investment bank who made a bad bet? I dont want to have my tax dollars funding something that amounts to a bail-out of these companies who took bad bets and lost. Tough, you dont think the same thing is happening to millions of Americans right now? About to lose their homes and all you can do for them is tell the ones who cant afford it to just walk away and screw over all the hardworking ones? For the first time in my life, I am almost sick of living here.
Interest rate cuts, whether to held the credit crunch or market are bad for the average american and good for the wealthy. Low interest rates and wealthy greed got us here. Let the market run its coarse and let the greedy take their hits…
For Spock_rhp-
It isn’t so much that “we don’t get it.” It’s such that “we don’t like it.”
The problem with the global poker game is that it isn’t so much a game among other games in which to choose, as it is a dominant system that forces us to play. The 1 game becomes life…and that, to an economist or any successful player, is a royal flush.
Well the Fed does what’s good for Wall Street and not Main Street at we the common tax payer gets to pick up these costs not the big guys who caused all these problems. You’ll have to go look but the M3 money supply is up 30% in the last 6 months and so when our friend Ben Bernanke says inflation is under control it’s so you don’t panic as inflation not core CPI will be running 10% or better this year. One way to make these losses less painful and to artificially boast houses prices is to have high inflation. Then these over bloated homes look like they are worth what the prices climbed too. Be ready to suffer for the rich and Wall Street so they can stay on top along with our political elite.
What I do not understand is why You “CNN” Have not printed this story A year and a half ago? Two years ago?The working class have had our incomes eroded, Yet until it hits those rich enough to invest in the stock market, Speculate in housing. The economist from “CNN” continued to preach everthing is fine??????
YES, THEY ARE KILLING MY MONEY MARKET AND CD ACCOUNTS. SINCE I AM ALL BUT OUT OF THE STOCK MARKET I AM MAKING 0 OR LESS ON MY INVESTMENTS. WHAT DOES THAT DO TO A PERSON 62 YRS OLD. ???
PAUL THOM
The FED’s policy of lowering the rates is out of time. We are a debtor country and no longer a creditor one as we used to be. Lowering the rates will help 1 million irresponsible home buyers (who shouldn’t have bought in the first place) and hurting the other 299 millions of us.
Of course this amounts to a taxpayer bailout. But what is EXTRA unfair is that all of the investment bankers have been patting themselves of their own backs with multi-million dollar bonuses and fees due to the “risky business” that they were involved in. Now it seems that there is no risk to them at all as they are protected from up on high.
Unfair!
The collapse of the dollar is an unmitigated disaster. The role of the US dollar as the defacto world reserve currency has brought benefits to this country that would be hard to exaggerate. The hardship associated with a recession, which is probably just the medicine the economy actually needs, is very mild compared to the likely consequences the US will suffer as a long term result of a major international currency realignment. The Federal Reserve Board should be raising interest rates as a signal to the world that we will protect our currency, a lot of which is actually theirs through massive foreign holdings of US debt instruments. We are playing with fire trying to bail out everyone and keep full employment. It won’t even work in the end anyway. We must eat bitter fruit and restore our economic integrity.
Did any of us really doubt that Washington would offer a self-serving bailout-help to its Wallstreet breathren?
If you pay your mortgage ontime and you attempt to save money, you’ve just been slapped in the face. The clear message here is that extensive credit, overspending and risky investments are rewarded.
Unlike most of the commentators below, I get it. Maybe that’s because I’m part economist.
The big firms that took excessive risks are indeed being shaken out as they should. Bear Sterns was once $147 a share and was sold at $2 in an “arranged marriage”. Countrywide similarly lost about 90% of the shareholder’s value in its sale to Bank of America.
This is what is supposed to be happening.
***
Now for the Bear deal — think of the world financial scene as huge games of poker. Bear was one of about 20 dealers worldwide. The dealer’s job is to guarantee that all of the other players in the game can actually afford to make the bets they want to make with each other.
The players in the game are all the farmers, ranchers, stores of every kind, lumber outfits, cattle buyers, feedlots, and all of their major customers worldwide.
Bear had maybe $30 billion in capital and loss reserves. The betters whose deals it had approved have bets totaling $300 billion or more. Bear and the other dealers weren’t making book [taking the other end of the bets], but simply assuring that betters [who mostly don't know each other] can afford the bets they’ve made.
The bets are much more complex than in simple 7 card draw poker — betters were also betting on every combination possible [who will draw the ace of spades, for example].
While the game was underway, after bets were made but before the next round of cards were drawn, Bear [the dealer and guarantor of the players' ability to play] had a heart attack.
Now the situation is that either some other dealer [Morgan in this case] steps in to take over Bear’s games, or all the players in all of Bear’s games start grabbing as much of the pot as possible — and if someone isn’t fast enough [or doesn't have a nasty enough government backing their play], well — tough!
Since all the players in the Bear games are also players in all of the other 19 dealers’ games, the resulting ruckus would end up with every player in every game trying to grab as much as possible and then some of the players would end up shooting other players simply because they think they can get away with it.
The sheriff [Federal Reserve] and the Judge [Treasury Department] aren’t about to have the players killing each other over the bets at the Bear Sterns tables — those players are the same outfits that handle 75% of world trade and that world trade is 30% of all American jobs.
If the games come to a screeching halt with everyone grabbing for the pot, the Depression begins.
Are Fed rate cuts and the Bear Stearns bailout helping or hurting the economy?
The Fed rate cuts are nearing their end: they will stop at 2%, which is 0% real interest rate, probably by the end of June. Then, we wait.
The Bear Stearns situation is hardly a bailout: the stock went from $159 to $2 in less than a year. The company has been punished enough. By facilitating the transfer of Bear assets and liabilities in total to JPMorgan, the Fed is just giving Bear a ‘Christian burial’. RIP, Bear.
This sends a powerful message to the other investment banks to clean up their acts quickly.
It would not be surprising to see one or a few more of these, but it looks like we’re almost done here.
In answer to the question “where does the Fed get the money they give out”, I’d imagine fully half the people in this country think that our government, the Fed included just MAKE money. I see evidence in the newspaper, on television…tax increase to fund 1/2 of new complex and the government is chipping in the rest. Guess what, our government doesn’t make anything, they take our dollars from a list of taxes too long to list and then borrow from today’s friends, tomorrow’s potential enemies because it still isn’t enough. Technically, we all own a share in these failing financial institutions and I don’t know about you, I don’t like that one bit!
With all the hoopla about lowering rates, why haven’t the long term rates come down to offer some relief to the consumer (i.e us little folks)??
It appears that the Bush administration is just concerned about helping their financial buddies.
We were said that so called “investors” which are actually just speculators in many cases have much less federal tax rate then working people because, they are risking their money. Now it seems there is almost no risk for them at all. They can be involved with whatever gambles they like – our government will bail them out.
I am absolutely appalled at the government’s numerous attempts to bailout the greedy institutions at the expense of me! a regular tax-payer. How are they injection the hundreds of billions of dollars and now the bailout of Bear Sterns. Let the free market take its course so it will correct itself.
By the way, how do I let our government know this is bogous, and they need to stop the charade of devaluing my savings. Is there a petition out there?
Question: Ever wonder why failed corporations are escorted to safe harbor by the federal government and failed individual investors and small business owners are left out to twist slowly in the wind for their poor financial decisions?
Answer: The American Government is a wholly owned subsidiary of multinational corporations, their lobbyists and their interest groups. They will go to any lengths to protect their own. Individual investors and small busineess owners are not part of that club
Solution: The American People need to take back control of their own government from these corporate interests. Wake up America! You can’t keep doing the same old things over and over and expect different results.
I believe someone defined that as insanity
Definitely hurting the economy.
Bernanke and the FED are incompetent morons. The more they lower rates and give the banks large sums of money, the less our saved dollars, interest income, and regular income dollars are worth. As the cost of necessities continues to rise, more and more hard-working honest people will struggle to make ends meet. Some of these people will end up not able to pay their mortgages.
Meanwhile, greedy bankers that caused this mess in the first place are bailed out and rewarded. It is quite disturbing and disgusting.
I am worried that my substantial life savings that I have worked very hard to build will be worthless soon. Instead of living below my means and saving money every month, I might as well have been like everyone else and lived above my means and borrowed money every month.
The stupid and greedy are rewarded and bailed out again and again while the smart and honest are penalized again and again.
If everyone thinks the rate cuts and diminishing of interest earnings on savings accounts is bad now, wait until Paul Krugman is right and the Fed institutes a Zero Interest Rate Policy. Then watch your savings erode.
And if our ZIRP is anything like Japan’s period of ZIRP (2001-2006), it could be an extended period of time before we see any interest earnings on savings accounts be realized again.
Man, those Series-I Savings Bonds are looking good right now. Then again, that’s just giving money right back to the Fed.
This loose monetary policy is killing us softly. Instead of hurting the banks and borrowers that gambled on interest rates, it is hurting everyone.
Every time interest rates go lower, so does the dollar. Weaker dollar means higher oil prices. Oil at $110/barrel is only an American problem. Europeans are only paying 70 Euros per barrel. It wasn’t that many Fed rate cuts ago that 1 dollar equalled 1 Euro.
Since there is a lag on when rate cuts begin to have an effect, I would say it is too soon to say. But isn;t lowering the rates one reason why we are in the current economic crisis? Surely, the main reason is American consumer culture- buying on credit, buying for buying’s sake (hobby?). But, as the rate lowers and inflation rises, we shall see (already seeing) consumers spending less. I hope the rate cuts hurt- they need to hurt…we need a reminder that capitalism isn’t impenetrable.
Where is the media when it comes to advocating for the consumer? The Fed is lending=giving banks billions of dollars to save their butts in what I like to call the false-claimed-free-market, while consumers (which=75% of the economy) are getting a rebate = to pennies when you take inflation into account. The government is truly playing a psychological game with the average American and there are no mass media players willing to raise awareness on how much Americans are getting taken advantage of- of course, this isn’t limited to American’s getting taken advantage of- foreign laborers have it a lot worse than we do.
This can all be summarized by “privatize profits and socialize risk/loss”, that history has proven time and again. Wall St made hefty profits on fees and packaging and selling financial “toxic waste” to “investors” (socializing risk). However not being able to sell all of it they got caught with their “pants down” and now the Govt is bailing them out, with our money of course (be it tax dollars, or inflation) – step 2 of socializing loss.
Funny, several years ago the concern was that we were not saving enough and it was hurting the economy. Now they continue to drop interest rates and savings vehicles are not good, housing is not good, the stock market is not good, food prices are up, gas is up, financial companies who raked in big bucks on our backs are failing, and the government is keeping a weak dollar so imports that they told us was good for the world economy are rising. Good thing they really care for us.
It’s not just the rate cuts, it’s also the billions of dollars the Fed is extracting from taxpayers–they’ve created hundreds of billions of dollars out of thin air so far this year, devaluing the dollars people earn, and they’re bailing out the banks by letting the banks use bad mortgages for collateral–which means the taxpayers are paying for those loans. The bailouts have, so far, cost each individual taxpayer something like $3,000.
Here’s a question for you – where does the Federal Reserve get all this money to bailout all these people. Ever wonder that?
I agree with C.L. We should let the foolish take thier pain and the free market will correct itself rather than helping the individuals and institutions who got us into this mess.
Rate cuts are definitely hurting the economy. If you can’t afford to buy a house at 6% you will not be buying a house at 5%. Same for a car,etc. Plus the banks are passing the rate cuts through to consumers. Instead the banks have jumped credit cards from 14% to 18% or 24%, raised car and home loan rates. Thank God my house is paid for and I can now pay cash for everything and NOT have a credit card balance. The bank is NOT your friend.
It’s time that we admit to ourselves that elected politicians aren’t economists and those that are work for those who aren’t. When the Federal Funds rate hits zero, is Ben going to start paying people instead and what about all the earnings these finance houses brought in and sheltered in the up times….I can’t wait to be bailed out of my debt, for my poor decisions, maybe then I can afford to top off the tank.
Clearly the FRB is the pocket of Wall Street now. Instead of letting a recession do its job of penalizing institutions that made bad investments and cooling a stock market that’s more or less been on fire for years now, it’s willing to prop up companies by loaning more money under conditions that ordinary consumers would never find and doing everything to prevent bankruptcy. Meanwhile, individuals are finding it harder and harder to claim bankruptcy to bail themselves out and can barely save because of their low interest rates.
Let the recession run its course. Let Wall Street stumble; those firms have the money to get backup on their feet as they undoubtedly do, but ordinary people do not. Help us out.
It strikes me that the huge amounts of money being thrown at banks and investment houses could have been better spend in buying down the principal and refinancing “at-risk” mortgages.
If you help the mortgage holders directly, they won’t default. That way both the banks problems and the economy’s are solved. I’ll bet that in the long run, it will be cheaper.
This is nothing more than a bailout of the rich on the backs of the poor and middle class.
The Fed is behaving like a crack dealer!
Thanks Bernanke!
I am fighting mad about the FED selling us middle class people out to save Wall Street behinds. The average Joe will not see a significant difference whether the credit markets function or fail; it will be bad either way. I say let the chips fall where they may so that the Big Boys find out that it is not “Heads they win, Tails we lose”! Not going to happen though because the average Joe doesn’t matter.
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Reply to Jules in Melbourne, FL
Jules, please use caution when investing with ING Bank,
they probably are a safe place to have your money, but red flags would be going up for me. When you see interest rates that are clearly above the norm that usually means there is some problem or cause for concern or the rates are an introductory rate for a period of time then the rates drop to 1.5% to 3% after that introductory rate is over and usually your money is tied up for awhile after that. Everything is probably on the up and up but I certainly would use caution and I certainly hope that ING Bank is not the next one looking for a government bailout but with interest rates higher than 8%, kind of makes you wonder if they aren’t the next one in line.