U.S. interest rates slashed by 75 basis points

U.S. interest rates slashed by 75 basis points

All this does is help the banks and the wealthy! If the government really wanted to help the real American consumer, the general public, the working man and woman, what they should do is force all credit card companies to reduce the interest rate charges on their cards.

This would immediately lower the debt of the card holder and the payment amount creating in effect more cash in their pocket each month since they don’t have to shell it out to the credit card companies.

It would be like getting a pay raise if they would cut it by 50%.

US Interest rates cut

I dont think the hefty 3/4% emergency cut of interest rates will help much becos it will weaken USD further...this in turn will affect export-oriented countries whose main trading partner is the US,becos needless to say US will buy less.
What US Fed shd have done or can do now is to tackle the main issue that started the financial woes and i.e. the subprime issue. US Fed shd give direct aid to the subprime loan defaulters by negotiating deals with them thus enabling them to service their loans and retain their homes., one of the deals should be cutting of interest rates attached to those loans., thus reducing the amount they need to service.
If this can be done successfully, at least the largest part of the financial woes can be solved...and the after-effect will snowball to the other sectors of the economy.
By cutting the hefty 3/4% rate,it benefits the rich more than the poor and thus helping the rich to get richer becos they are the ones who can afford to buy up cheap properties now with revised low interest rates. Its the poor that the government should be helping now, not the rich..

Rates

I disagree with Loaf. I have worked in the lending field for many years and it is not as cut and dry as you may think. Guess what just like when rates lower and we save money the banks loose money that is less money they can collect on interest and so that means less that they can reinvest. Also as far as credit card rates everyone should be full aware of those rates before they sign up for them. I have credit cards and use them when I have to. However rates being lower for someone to buy a home is a much bigger picture. That is a major investment unless the property is in a really bad area or is not kept up, a person would make a profit off of the sale of a home. Also equity loans are much cheaper rates than credit card rates so it could be much smart for someone to use the equity in there home for extra money rather than a credit card. That way you pay your self.

Credit Card Lending Rates

Jano seems a little biased since he is in the lending field. Cuts in credit card rates would provide greater opportunities for people to purchase and save. If interest rates on savings were increased there would be more money for banks to loan and individuals would have more money to spend. This would allow us to spend out of a recession with balanced spending rather than just the rich and wealthy companies being able to spend.

Lending institutions could also lend more wisely by approving less risky lending and reduce the amount of bad debt that has to be written off and passed onto other borrowers. No credit card company should be able to charge 33% interest on a charge card. These same lending institutions only pay around 1% for money saved. A borrower in that situation is better to pay off the credit card rather than save. This causes a shortage of available money to lend. If a credit card is paid off each month it causes money to be loaned and with no return on investment.

If lending institutions lowered their profit margin on loans by lowering interest charged while raising savings rates and coupled that with reducing the high risk lending (e.g., lending 100% on home mortgages to borderline borrowers) they could maintain their profits and allow individuals to purchase real goods.

It is well documented that credit cards actually restricts GDP power rather than increase it. Most lending institutions and their leaders are short-term thinkers though because they must quarterly keep the numbers up. Eventually that house of cards collapses as we are seeing in the mortgage and housing markets.

Fed rate cut for what its worth...
:confused:
Impact of bold Fed rate cut may be limited
Tues., Jan. 22, 2008 � Housing market spurs fear of lending, which central bank can�t control

]
The Federal Reserve’s bold three-quarter point cut in interest rates was designed to stem the slide in the stock market and ease widening fears that the U.S. economy is sliding into recession. While the move helped slow a global slide in stock prices Tuesday, the long-term economic impact of cutting interest rates may be limited. Why? To paraphrase an old campaign slogan, it�s the housing market, stupid.

Though mortgage rates have been low for months, the housing market is still stuck in its worst recession in decades. Even as housing starts continue to fall, the inventory of unsold houses has risen. With prices falling in many parts of the country, buyers are waiting for a turnaround before they start house hunting again. As foreclosure rates have risen, so has the pace of unsold houses being dumped on the market. At some point, the housing market will hit bottom. But the timing of that turnaround remains extremely murky � in large part because it�s unclear how many more homeowners will lose their homes to foreclosure this year and next.

Over the next several years more than $1 trillion in adjustable mortgages, written during the height of the easy-money lending boom, is scheduled to reset to higher rates. Unlike conventional ARMs that move lower as market rates fall, many of these mortgages are set to ratchet up to monthly payments that many homeowners won�t be able to afford. Lenders and investors have already written off roughly $100 billion in losses so far. But no one knows how much more debt will go bad � or who is holding the bad paper. So even after the Fed has flooded the system with money, lenders remain tightfisted for fear that the borrower won�t be able to pay back the loan.

More [url:
http://www.msnbc.msn.com/id/22783705/[/url]

U.S. interest rates slashed by 75 basis points

Just another reason why people are confused by mortgage rates and information printed about mortgages. The title of this article is very, very misleading. I received 20-30 calls today asking what happened with mortgage rates, this is coming from educated people as well as people who don’t know much about finances.

Mortgage rates have been declining the past couple of weeks based on the speculation that this move was coming the next dip in rates will be on the speculation of the rate cut that is anticipated on the 30th of January.

http://biz.yahoo.com/cnbc/080122/22783168.html?.v=1&.pf=loans

is a great article! www.indigodearborn.com

U.S. interest rates slashed by 75 basis points

Just another reason why people are confused by mortgage rates and information printed about mortgages. The title of this article is very, very misleading. I received 20-30 calls today asking what happened with mortgage rates, this is coming from educated people as well as people who don’t know much about finances.

Mortgage rates have been declining the past couple of weeks based on the speculation that this move was coming the next dip in rates will be on the speculation of the rate cut that is anticipated on the 30th of January.

http://biz.yahoo.com/cnbc/080122/22783168.html?.v=1&.pf=loans

is a great article! www.indigodearborn.com

The best way to straighten out the subprime crisis would be to convert the ARM loans to fixed rate ones...
;)
Fixed mortgage rates fall to lowest since '04
January 24 2008: Rates on home loans drop after Fed makes emergency cut to fed funds rate, Freddie Mac says.

]
Mortgage rates continued to fall this week, with 30-year and 15-year fixed-rate mortgages hitting their lowest levels in nearly four years, Freddie Mac reported Thursday. The government-sponsored loan buyer said the rate on a 30-year fixed-rate loan averaged 5.48 percent for the week ending Thursday, down from 5.69 percent last week.

At this time last year, the 30-year fixed-rate mortgage averaged 6.25 percent. The 30-year rate has not been lower since the week ending March 25, 2004, when it averaged 5.40 percent. “Economic news released last week confirmed the weak condition of the housing market," Freddie Mac vice president and chief economist Frank Nothaft said in a statement.

“When the Federal Reserve cut the target federal funds rate by three quarters of a percentage point, the action was extraordinary in both the magnitude and the timing of the rate cut," he said. Freddie Mac said 15-year fixed-rate loans averaged 4.95 percent, down from 5.21 percent last week. A year ago, the 15-year rate averaged 5.98 percent. The 15-year rate has not been lower since the week ending April 1, 2004, when it averaged 4.84 percent.

Rates on five-year adjustable-rate mortgages (ARMs) averaged 5.13 percent, down from 5.40 percent last week. The 5-year rate averaged 6 percent at this time last year. One-year Treasury-indexed ARMs averaged 4.99 percent, down from 5.26 percent last week. At this time a year ago, the 1-year ARM averaged 5.49 percent.

[url=http://money.cnn.com/2008/01/24/real_estate/mortgage_rates/index.htm?section=money_mostpopular:
Source[/url]

Most things in life have their trade-offs
;)
Fed rate cuts don�t come without economic risk
Sun., Jan. 27, 2008 WASHINGTON - Central bank action could spur consumers to again live beyond their means

]
Lowering interest rates � the Federal Reserve’s tool for bracing the wobbly economy � is not without risk. Fed Chairman Ben Bernanke and his colleagues are expected to cut rates by as much as one-half of a percentage point at their regularly scheduled meeting this week. It would follow up a rare three-quarter-point reduction, ordered last week at an emergency session Bernanke convened after stocks worldwide plummeted, intensifying fears the U.S. was on the brink of a recession or had fallen into one.

To bolster the economy, the Fed probably will keep dropping rates for much of the year, economists predict. That course, however, carries risks for the economy and people:

* The Fed can lower rates only so far � in theory to zero. So the central bank must be careful it does not run out of room to cut rates.

* Lower rates could aggravate inflation. Consumers and businesses already are smarting from high energy prices. Dropping rates even more can further weaken the dollar. That could raise the cost of imported goods coming into the U.S. and lead American companies to raise their prices as foreign-made goods become more expensive.

* If rate cuts restore the economy to full throttle faster than anticipated, then the Fed could be forced to reverse course and abruptly raise rates. That would jolt Wall Street, businesses and people.

More [url:
http://www.msnbc.msn.com/id/22868725/[/url]

Another 1/2 point cut...
;)
Fed Cuts Interest Rates by 1/2 Point
Wednesday, Jan. 30, 2008 (WASHINGTON) — The Federal Reserve on Wednesday cut a key interest rate for the second time in just over a week, reducing the federal funds rate by a half point. It signaled that further rate cuts were possible.

]
The Fed action Wednesday pushed the funds rate to 3 percent. It followed a three-fourths of a percentage point cut on Jan. 22, a day after financial markets around the world had plummeted on fears that the U.S. economy was heading into a recession. That decrease had been the biggest one-day move in more than two decades. The half-point cut Wednesday followed news that the economy had slowed significantly in the final three months of last year with the gross domestic product expanding at a barely discernible pace of 0.6 percent, less than half what had been expected. The report came amid increased concern from several quarters about a possible recession.

Federal Reserve Chairman Ben Bernanke and his colleagues held an emergency videoconference call on Jan. 21 after a turbulent day on world markets when investors grew increasingly worried about what a recession in the United States would do to the prospects for global growth. Many analysts believed the Fed would quickly follow last week’s aggressive move with a cut of at least a half-point at its first regular meeting of the new year. That view gained support on Wednesday hours before the Fed announcement, when the government reported that the total economy slowed to a barely discernible 0.6 percent growth rate in the final three months of last year.

The increase in the gross domestic product was just half what had been expected and some economists believe that the GDP could tumble into negative territory in the current quarter. One definition of a recession is two consecutive quarters of negative GDP. However, other economists said they were still looking for just a quarter-point move by the Fed because other reports show the economy appears to be skirting a full-blown recession.

[url=http://www.time.com/time/nation/article/0,8599,1708270,00.html?xid=feed-rss-netzero:
MORE[/url]

See also:

Who is the Federal Reserve?
Jan. 30, 2008 - A Look at the Men and Women Who Decide When to Raise or Lower Interest Rates

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The men and women who considerable sway over your money sit on the Federal Open Market Committee, whose interest-rate decisions ripple through the economy. A look at this year’s voting members:

Ben Bernanke, Federal Reserve Chairman

Bernanke traces his interest in economics to some less-than-wonky summer jobs after high school and in college. After graduating from high school, he helped build Saint Eugene hospital in his hometown of Dillon, S.C. “I remember that, on the first day I came home from the construction site that summer, I was too tired to eat and I fell asleep in my chair," he says.

During the summers of his college years, he waited tables six days a week at South of the Border. “I remember the fellow construction worker who wanted to become foreman someday and a waitress who was saving to go to college," he says. “I was impressed by these experiences, and I think they were an important reason I went into economics, which a great economist once called the study of people in the ordinary business of life."

Now approaching his second anniversary as Fed chairman, Bernanke, 54, is confronted by his biggest challenge: housing and credit debacles that threaten to push the economy into its first recession since 2001. How well Bernanke — a scholar of the Great Depression — handles these crises will shape his effectiveness, his credibility and his legacy at the central bank.

[url=http://abcnews.go.com/Business/MarketTalk/story?id=4210543&page=1:
Timothy Geithner, president of the Federal Reserve Bank of New York[/url]