Fed Cuts Benchmark Rate to Near Zero

[maco]

WASHINGTON — The Federal Reserve entered a new era on Tuesday, setting its benchmark interest rate so low that it will have to reach for new and untested tools in fighting both the recession and downward pressure on consumer prices.


“At some point, and without knowing the timing, the Fed is going to have to destroy all that money it is creating,” said Alan Blinder, a professor of economics at Princeton and a former vice chairman of the Federal Reserve, said the central bank. “Right now, the crisis is created by the huge demand by banks for hoarding cash. The Fed is providing cash, and the banks want to hoard it. When things start returning to normal, the banks will want to start lending it out. If that much money is left in the monetary base, it would be extremely inflationary.”
http://www.nytimes.com/2008/12/17/busine...17fed.html

[swampy]

Sounds stupid to me. Banks aren't lending money to each other so what is lowering the interest rate supposed to do to encourage them do so? Paulson screwed up when he gave the banks all that money with no strings. Now they are using it to buy other banks. That's not what it was meant for.

[samintx]

I didn't realize the Paulson is a buddy buddy of Al Gores. Right there, he isn't my fav. I read an article about Paulson and he seems like a good guy but I think he is not great or even good.

Wasn't he an big time athelete?

[kap]

Will he go down in history as the most incompetent Treasure Secretary?
Seriously, I had thought that there was a contract between the US Treasury and the failed banks, which required the bail-out money was to be lend out.

[Wags]

Smart folks are already buying wheel barrows to haul their money down to the bakery.

[Seacrest]

samintx wrote:
I didn't realize the Paulson is a buddy buddy of Al Gores. Right there, he isn't my fav. I read an article about Paulson and he seems like a good guy but I think he is not great or even good.

Wasn't he an big time athelete?

[Ted King]

swampy wrote:
Banks aren't lending money to each other so what is lowering the interest rate supposed to do to encourage them do so?

I heard on NPR this morning that the Fed realizes that what you are saying is true, so they may be considering creating financial lending vehicles that skip the banks - where the fed is much closer to directly making loans itself. That would be interesting - maybe just the threat of them doing so might shake loose some lending from the solvent banks.

[Mac1337]

Let's just get it over with and all live in government housing. No mortgages, no defaults, never upside down, no housing bubbles. With the Fed actually becoming a lender, we are not that far away. No foreclosures either. After all, the Fed doesn't need to get paid to stay afloat.

[mikeylikesit]

Seacrest wrote:
[quote=samintx]
I didn't realize the Paulson is a buddy buddy of Al Gores. Right there, he isn't my fav. I read an article about Paulson and he seems like a good guy but I think he is not great or even good.

Wasn't he an big time athelete?

Sam does this regularly. She'd rather forget Paulson is Mr. Bush's choice by implying a Gore connection, good thing he wasn't born anywhere near Chicago.

[Black Landlord]

Dakota wrote:
Let's just get it over with and all live in government housing. No mortgages, no defaults, never upside down, no housing bubbles. With the Fed actually becoming a lender, we are not that far away. No foreclosures either. After all, the Fed doesn't need to get paid to stay afloat.

Non sequitur.