Fed Cuts Rates By A Quarter Point

Just came over the wires at Bloomberg:

The Federal Reserve reduced the rate on direct loans to commercial banks by a quarter-point and said it will allow primary dealers to borrow at the rate in exchange for a “broad range” of investment-grade collateral. . . The central bank, in a statement today in Washington, also extended the maximum term of discount-window loans to 90 days from 30 days. The Fed approved the financing arrangement announced by JPMorgan Chase & Co. and Bear Stearns Cos. JPMorgan separately agreed to buy Bear Stearns for about $2 a share.

Pretty damn busy for a Sunday night. Man, they are running scared aren’t they? I imagine the dollar is going to get clobbered today.

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Sean Paul Kelley

Traveler of the (real) Silk Road, scholar and historian, photographer and writer - founder of The Agonist.

15 CommentsLeave a comment

  • As you say, they are running scared. Everyone can smell it. It is not likely to induce further lending, but rather cut back on market transactions entirely in the credit markets. As for the stock market….I don’t know how they will keep propping that up.

  • It sounds like the Fed has opened the discount window to brokers. This is unparalleled. At the very least, if the brokers are going to get the same lender of last resort privileges as the banks, they should be regulated like banks. If the brokers survive this crisis, it now seems inevitable that their licenses are going to be converted into bank charters.

    Where this puts the SEC as regulator I don’t know, but in less turbulent times this would be viewed as a power play by the Fed. Given the circumstances, though, this is probably desperation.

  • They should. But will they?

    What the Fed should have done, years ago, is enforced real reserve requirements with no ability to use credit insurance. Leverage levels should never have reached so high.

    As for the SEC, it was deliberately crippled by Congress.

  • U.S. stock index futures erased their initial gains and fell sharply on Sunday evening after the Federal Reserve unexpectedly cut the discount rate and said it will allow primary dealers on Wall Street to borrow at the discount rate.

    S&P 500 futures SPc2 fell 20 points and Dow Jones industrial average futures DJc2 sank 142 points. Nasdaq 100 NDc2 futures tumbled 32.75 points.



  • But eventually the Fed will be given regulatory authority over Wall Street, as part of a “never again” movement to prevent such disasters until 80 years later when the Republicans are back in power.

  • Too many Wall Street millionaires just lost their fortunes.

    But this won’t really hurt the Republicans until it reaches down into the economy and hurts everyone. That’s not happened yet, but the layoffs from corporate America are coming maybe six to twelve months from now. At the moment this just raises the general level of anxiety and mistrust of banks.

  • Dow futures down 165, Yen is trading at 96.8/USD, Euro about $1.58–pretty close to twice what it was worth in 2002.

    The markets don’t care much for this, do they?

  • Maybe we need a bit of lightning up? Ok, right now, big worries, banks want to hold onto funds, call/reduce loans to ventures whose financial merits are not clear … so effectively money supply (availability of credit) is contracting. Thru various means “system” is injecting new capital (credit). Fair enough … what has to (should be) done by any central banker type who intends to act to meet requirements of the job.

    Later, situation will stabilize … ie, lending to worthwhile ventures will resume, and plenty of new funds available. Recovery happens, etc. It is not as bad long term average as it looks now, but things will get worse before they get better. But – as Chancy Gardiner says – after the winter, comes spring.

  • Oh, it ain’t gonna be pretty. Better pack a hip flask with your bag lunch:

    Light, sweet crude for April delivery spiked to a record $111.42 a barrel — up $1.21 from Friday’s close — in electronic trading on the New York Mercantile Exchange midmorning in Singapore. It later slipped back to $111.08 a barrel around midday.

  • S-P at C&L

    this computer is lame.
    i can barely sneeze what it needs rebooting.
    especially after visiting C&L for some reason. so i don’t visit there every day like i usedta.

    now i gotta reboot…

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