Posted on 12/16/2008 11:35:21 AM PST by Sub-Driver
Fed Cuts Rates to Historic Low
By BRIAN BLACKSTONE and MAYA JACKSON RANDALL
WASHINGTON -- U.S. Federal Reserve officials on Tuesday slashed official interest rates to an historic low range to combat a deepening recession and signaled they will keep rates "exceptionally low" for some time amid rapidly waning price pressures.
Officials also signaled a new phase for policy in which lending programs financed by the Fed's ballooning balance sheet, a process known as quantitative easing, replace the federal funds rate as the Fed's primary policy tool.
The Federal Open Market Committee voted unanimously to reduce the target fed funds rate for interbank lending from 1% to a range of zero to 0.25%, the lowest since the Fed started publishing the funds target in 1990. The market-determined effective fed funds rate already has already hit record lows in recent weeks. (Read the Fed's statement.)
Economists had expected a smaller cut of just 0.5 percentage point, and hadn't envisioned the Fed setting a range.
(Excerpt) Read more at online.wsj.com ...
Low interest rates didn’t cause the problem.
Lending money to people that couldn’t/wouldn’t pay it back was the problem, and that’s a problem at any rate of interest.
People could afford to borrow more so the prices went up to match along with demand.
Add to that terrible lending practices (sub prime, no doc, interest only ARMs) and you have the disaster of today.
Hence “easy money” is the cause.
“Enjoy your 1745 economy.”
The 1929-41 economy is what is needed.
That is true, but a simple bubble became disaster when you added the fact that one didn’t have to prove they could pay back the loan.
Low rates are one thing. Easy credit is another.
It was the combo that was the killer.
Do they have a brain? Why would anyone trust the government to return their money now? Our withholdings are even getting adjusted to deter all extra funds from being held by Uncle Sam.....err Uncle Sharia.
A co-worker locked his refi in yesterday at 4.5%.I couldn’t understand how the rates are going lower,when the Fed Rate just got slashed.Last night I heard that the Treasury taking over mortgage backed assets is why the rates are going down.
I love it - you get to be a detective for yourself and your family. You get to meet a whole bunch of people that you automatically have some common points of reference - and many times have a free hotel all over the country or even overseas. Part of what I also like is learning about the times in which your ancestors lived - it puts things into perspective when you realize that they didn’t have running water, indoor toilets, electricity, decent medical care, etc., let alone microwaves, cable TV, heated toilet seats, enclosed cars with heaters and A/C, A/C in general, etc., etc. - yet they survived. All of mine came over in steerage - that must’ve been a barrel of laughs in rough seas, being cold, wet & sick. Given the economic times we’re in now, perhaps we could all benefit from that kind of perspective, because many of us may have no choice but to do without things we now take for granted.
I’m Jewish, with the family from Poland and southern Russia. Trying to find data from the old country is a real challenge, and it is really rewarding to make a breakthrough. It is also interesting to see what a bunch of morons some of the relatives are - Obama voters. Glad that the intelligence and common sense genes got passed to me and those closest to me.
I am in the exact same position as you are except I only have $80k remaining. I am choosing to pay it off. The falling dollars means they are getting less value where I’ll end up with a solid asset. I am also prepaying five years of property taxes.
Strongly consider NVDave’s suggestions especially “would losing the mortgage interest deduction (if you take it) raise your tax bracket or cause you to lose other deductions?”
For that very reason I am making two payments to the mortgage company. 50% this year and 50% in January.
“Glad that the intelligence and common sense genes got passed to me and those closest to me”
Being a hard headed Irishman, the above mentioned attributes have taken alittle longer getting thru to me....but better late than never. Take care and I hope the coming year (for that matter, the next four years) will treat you well.
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