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Bonds Are a 'Safe' Investment: A Big Lie Gets Even BiggerThe Federal Reserve is indicating that more rate cuts are on the way as a recession has probably begun and the financial markets are still troubled. According to Bloomberg, Fed chairman Bernanke told "lawmakers that the central bank is ``ready to respond to whatever situation evolves,'' and cited ``considerable stress'' in markets."
The rate cuts may do no good. Banks still appear to have a large number of troubled securities on their balance sheets. A huge write-off at UBS (NYSE:UBS) and forecasts of lower earnings at banks and brokerages for the first quarter are an indication that the pain for these firms could continue well into the year. Goldman Sachs (NYSE:GS) recently estimated that total write-downs at financial firms could hit $460 billion.
The reduction in interest rates by the Fed may also do nothing for the consumer. Banks are not passing on lower rates to customers in the form of better deals on mortgages and credit cards. Financial firms are also not improving rates for loaning to small businesses. Even with cheaper money available, banks do not want to take any more risks with homeowners or small businesses.
Fed rate cuts aren't what they used to be.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
4-04-2008 @ 4:38PM
Charles Janeke said...
Bravo... The banks are infact tightening the noose on the consumer thanks to the Fed!!
Fed: more rate cuts, who cares?
"The reduction in interest rates by the Fed may also do nothing for the consumer. Banks are not passing on lower rates to customers in the form of better deals on mortgages and credit cards. Financial firms are also not improving rates for loaning to small businesses. Even with cheaper money available, banks do not want to take any more risks with homeowners or small businesses."
4-04-2008 @ 5:15PM
SKM said...
Greenspan started this mess with the free money and Bernanke acts the same. The Fed fundrate of 1% created all of the sub-prime problems and is destroying the dollar in the process. Anyone who wants to see our "almighty dollar" in action has to go to EUROPE AND TO ASIA in order to realize how little our dollar is worth today.
4-04-2008 @ 5:52PM
clem591 said...
why is the central bank refered to as the fed or federal reserve? to me it sounds like a fraud and a sham. its as to brainwash the public into thinking the fed is part of one of the three branches of the us goverment, and we know there is only three branches of our goverment. if it not part of our goverment it has to be a private intity.
do you think they don't know what the interest cuts are doing to our retirment. cut rates the dollar goes down. does that mean the value of the stock market / 401Ks goes down? we may be going the same way the feds are going global
4-04-2008 @ 6:54PM
william lindblad said...
The fed is pseudo government, so is the post office.
So what?
There may be some benefit in rates to some consumers, but they will be in the minority.
As to the banks - there scared of each other these days and are reluctant to do inter bank loans - like in LIBOR.
We got a problem - and it is just beginning.
Auto loans and credit cards - next up.
Wall street thrives on b.s. - and that is what is propping it up - for now.