Bloomberg.com is reporting that the Federal Reserve may couple a rate cut with additional measures to increase credit.
Federal Reserve officials, who are forecast to lower their main interest rate next week, are signaling that they are looking for additional ways to increase credit to companies and consumers.
“The Fed has to re-liquefy the markets to reduce the risk of a financial accident,” said Lou Crandall, who used to work at the New York Fed and is now chief economist at Wrightson ICAP LLC, a Jersey City, New Jersey-based research firm that focuses on government debt.
Banks are panicking. Credit isn’t available like it used to be because banks, lenders, investors, and everyone involved are trying to cover their positions and price the risk accordingly. The subprime mess is only the tip of the iceberg. There’s been a lot of talk about bad debt related to subprime mortgages dragging the markets down and causing CDOs to collapse, however we still haven’t heard too much about problems with regular mortgages made to borrowers with good credit.
Stay tuned for more! Until then, keep drinking and believing!
No comments yet.