Upcoming Fed Decision
Sep 16th, 2007 by Shaun Carter
Tuesday is the big Fed rate decision that has been playing havoc on the markets for the past few weeks. The market has pretty much priced in a 25 basis point reduction in the fed funds rate, but more and more people are thinking a 50 point reduction is possible. I’m really torn on whether Bernanke and Co. will lower rates at all, considering the economy itself is functioning at a satisfactory level and inflation is under control. The only reason to lower rates would be to provide some relief to the mortgage and credit industries to potentially save thousands of homeowners from losing their homes when their mortgage rates reset this fall. One company sure to benefit from a 50 point cut would be Countrywide Financial (CFC), which has been using more and more of its lines of credit in recent weeks in order to continue operating.
On the other hand, no cut of the rate at all could prove disastrous to the market as most everyone is expecting something. But I have to wonder why is it the Fed’s job to bail out consumers who didn’t read the fine print and mortgage companies that marketed very questionable loan products? There was a terrific commentary published in BusinessWeek recently which asks, “Dude, Where’s My Bailout?”
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