Will the Fed waste its dwindling ammo on a 50 basis point rate cut?

Ben Bernanke lacks a strategy to deal with the financial crisis. He just keeps dropping more and more money from his helicopter and hopes it will jump start the economic system. The futures market has already baked in a 50 basis point interest rate cut for this coming Wednesday so with the Dow having lost 312 points last Friday, it would probably collapse even further if Bernanke backed off the rate cut.

But what is the point of this cut? 30-year fixed mortgage rates are higher now (6.47%) than they were in August 2007 (6.45%) when the Fed began cutting the Fed Funds rate from 5.25% to what would end up being 1% if the Fed indeed cuts by 50 basis points on Wednesday. Paul Krugman argues that the high mortgage rates may be a result of U.S. policy not to put its "full faith and credit" behind Fannie and Freddie debt -- thereby increasing its risk. If the Fed was trying to loosen up credit, these numbers suggest its rate cuts are not doing the job.

And While there are some who anticipate it will cut only 25 basis points, I am not sure why the Fed thinks this rate cut will do anything more than use up precious ammunition that might be more useful in an even more severe financial emergency. At 1%, there is not much further to cut. And with the November election fast approaching, it is clear that a real strategy to analyze and fix the myriad financial problems Bush leaves his successor will not happen until January.