Posted on 08/16/2007 3:04:16 AM PDT by Hydroshock
The Federal Reserve is playing a tricky hand as calls for an emergency rate cut get louder after another day of significant stock market losses. Through its open market activities, the Fed has virtually cut the fed funds rate already, but officially left the target rate steady at 5.25%.
"The target funds rate is meaningless for the time being," says James Bianco, president of Bianco Research.
The Fed has injected enough liquidity into the banking system to bring the effective fed funds rate, or the rate that banks lend to each other, below 5% for three days now. This average overnight lending rate impacts the fed funds futures market, which now puts 40% odds on a 50-basis point rate cut by the Federal Open Market Committee's Sept. 18 meeting, according to Miller Tabak.
By allowing lending at a rate lower than the target, the central bank demonstrates its willingness to grease the panicky markets with extra cash in difficult times. But the steadfastness on the formal target rate says the Fed still believes the credit dislocations are a temporary problem, and that they won't impact the economy's strength.
Traders were sending another message Wednesday as another late-day selloff sent majors averages reeling. After trading near break-even for much of the day, the Dow Jones Industrial Average closed down 1.3% at 12,861.47, closing below 13,000 for the first time since late April. The S&P 500 fell 1.4% or 19.8 points to close at 1406.70, and the Nasdaq Composite fell 1.6%, or 40 points, to close at 2458.83.
(Excerpt) Read more at thestreet.com ...
I think this is the beginning. It is getting to the point the paper is not moving period. I also have heard of peoplewho were told tehy were funded for a house, with down and good credit,losing teh funding just before closing.
ping
Goody goody.
I wonder where all those people in California are going to refinance their homes? Or those unsold houses sitting on the market now for six months? 'My, my, my,' said the fly.
I was joking with my dad last night that the smart buys today migh be MRE’s and ammo.
On the other hand, a savvy seller might make some money on eBay.
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