Posted on 08/22/2007 5:42:03 PM PDT by shrinkermd
The former Ivy League professor can be expected to make some rookie mistakes after stepping into longtime chief Alan Greenspan’s shoes.
Rewind to March. Bernanke insisted the damage to the markets and economy was “contained.” In fact, it had spread like wildfire. By August, investors had learned that Alt-A mortgage lenders, investment banks and even foreign mutual funds had been exposed to the subprime rot.
On Aug. 7, with Wall Street in turmoil, the Bernanke Fed met and acknowledged the crisis. So it stubbornly kept interest rates tight, against the better advice of many (including this paper).
Two days later, a reporter asked President Bush about the market meltdown. “I am told there is enough liquidity in the system to enable markets to correct,” he said.
He was told wrong. Stocks tanked the very next day, forcing Bernanke to pump some $40 billion into the very system he apparently had assured Bush had plenty of liquidity. He since has injected $60 billion more in liquidity.
But the bad news just kept coming. So last week, Bernanke took the rare action of lowering interest rates between meetings.
(Excerpt) Read more at epaper.investors.com ...
Go figure.
Monday will be interesting.
The stock gains today had more to do with takeover rumors and rising treasury yields.
It’s a random number generator.
So IBD wants the Fed to lower interest rates and reflate the RE bubble? No thanks.
They did it in a coordinated action to inspire confidence in the market.
PE ratios - excluding financial sector - are at bargain levels. That and the low dollar means a buy opportunity.
Hey, Greenspan said we were headed for a RECESSION 4 months ago. Maybe he was onto somethin’.
Oops! Thought it said Fred. Nevermind.
Greenspan was brilliant at the Fed. He could juggle the economy like no other. One day the ponze scheme will come to a head no matter who is at the helm.
Go figure.
NEW YORK (Reuters) - Citigroup, Bank of America Corp. and three other top banks took the rare step of borrowing more than $2 billion total from the U.S. Federal Reserve, the banks said on Wednesday, in a bid to reassure markets and remove the stigma of getting short-term financing from the central bank.
...
Borrowing money directly from the Fed has historically been seen as a sign of weakness, but Bank of America, Germany's Deutsche Bank JPMorgan Chase & Co, and Wachovia Corp said they did it for the sake of the financial system. All five banks emphasized they have access to other, cheaper funds.
...
"The psychology is, if a bank needs to borrow from the discount window, and they think there's a stigma attached to it, they can say, 'Citi has done it, too,'" said Robert Albertson, chief strategist at Sandler O'Neill in New York.
Merrill Lynch today said Citi has no sub-prime problems and gave it a “buy” rating.
How can ANY generated number be ‘random’?
That sounds kind of bogus to me. Unless these banks plan to repay the money very quickly.
Greenspan is the one that overreacted to the dot.bomb bust with 17 rate cuts in a row.
He and the fed are the primary culprit in the current real estate meltdown.
Greenspan did not loosen credit standards only the availablity of funds. The banks got greedy and let people borrow money who could not repay under any circumstance.
This paper has it right. Its not so much the fact that the Fed has decided to lower rates, the fact that its putting money into the system to ensure liquidity etc. Rather its the fact that the whole things looks like surprise and panic responses to what was a very predictable event.
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