The fed just cut interest rate

[spinbaby]

Half a percent to 1.5%.

They must be panicked to do it at this hour of the morning.

[Marsala]

1. They have good reason to panic

What with the last two awful days followed by the rest of the entire world's stock markets crashing.

[AndyA]

2. Banks around the world cut rates.

It's a unified attempt to stop the bloodletting.

We'll see if it works...

[MadHound]

3. Inflation, hooray

The Feds are essentially powerless to stop the crash at this point, and they might as well stop trying, all they're doing is making matters worse. First the bailout, then buying up short term loans, now cutting interest rates, again. The presses must be working overtime printing out all that money.

[radfringe]

4. patching the gaping hole with bubble gum and duct tape... n/t

[Trekologer]

5. I'm afraid we are falling into a liquidity trap

And that's bad

[KharmaTrain]

6. And This Helps Borrowing How?

The British did their own bail-out this morning...a lot of banks are trying to flush the market with cash to try to get the credit markets going, but it's not like this mess can turn on a dime. What we're experiencing has been months in the brewing...the inaction that allowed the collapse of "big shitpile" set in motion a downward slide that won't clear up until all the bad debt and credit is washed out of the system. A flood of cash doesn't wipe this out and banks, even if they start relaxing lending rules today, will take weeks, if not months, to show any turn-around in the housing or consumer markets.

It's a great time to be a corporate raider...eventually the prices will fall low enough that profit takers and bottom feeders will start to move in...but where will that be? Two months ago, I heard 10,500 (poof), then 9,500...now it's 8,500 or 7,500.

[AndyA]

7. The banks themselves seem to be the problem.

They won't lend money. Which means the economy is effectively shut down.

They caused the problem with their greed, they've taken the deal on the bailout, and they STILL won't let loose of any money.

They are furthering the problem. The bailout should have made it mandatory that banks start lending again.

Meanwhile, foreclosures are still happening, job loss continues, and people aren't buying anything except the necessities. The real problems haven't been addressed at all.

[KharmaTrain]

8. A Catch 22

You are right...they won't lend money cause they're trying to hold onto whatever assets they have to protect what accounts they still have left. The greed that created the real-estate bubble went on for years and now these lenders are caught between having to account for these crazy loans and financial games they played while trying to protect their other investments and investors...in essence they took people's savings and investments to fund this gamble and now that it's crashing, they're doing all they can to protect their good customers or else they face insolvency. Thus, yes, the credit window is jammed shut and no bail-out will help this.

This credit crunch didn't happen overnight...it's been brewing for months. Last June I joked with a banker about how much down would I need to get a business loan, and he gave me a straight look and said 60%. That's not much of a margin for a small business to work with...and I suspect things tightened further since.

This credit bubble that is behind this entire mess has a long way to burst. We're not just talking about foreclosures now, but also personal credit accounts and the billions that are revolving out there that is the real economic time bomb that could destroy the middle class. The obsessive rates are forcing many who let their cards revolve to pay for the mistakes these banks have made and many others are falling behind as the rising costs and uncontrolled intrest rates on cards makes it harder and harder for people to make even the minimum payment.

No, the real problems haven't been addressed until there's a new bankruptcy bill that allows for renegotiations of these junk loans, controls on what interest rates banks charge their customers (and strong prosecution for predatory lending), enforceable regulations on banks and brokerage houses (including special "windfall" taxes on excessive corporate compensation) and the end of squandering billions of our own tax dollars on a mess in Iraq that has all but ruined both our military and the treasury.

Cheers...