posted on Jan, 22 2008 @ 08:09 AM
Originally posted by Karlhungis
but I fail to see how a reaction like this from the fed would be viewed as a good thing from large numbers of investors.
i think it has something to do with the accepted theory that for every 1/4 point drop in the banks' borrowing rate (from the Fed) translates to a
potential Billion dollars for the bank... they arbitrage their loan rates from the private loans they lend out to customers & businesses.
there's hundreds of sizeable businesses that have (on paper) 'guaranteed loan agreements' that the businesses have not yet exercised,
and with the current backlog of tight credit those guaranteed loans have been put-on-hold for the past several months...
If the businesses want to stay solvent (because their company treasuries are extremely low due to the recent 2,000 + point drop in markets)
they need to exercise their loans, now.
the Fed is protecting the banker elite is the bottom line...
under the ruse of saving & stabelizing the economic engine of America..
To me it is showing that the government is very concerned about this and if they are very concerned...
The Federal Reserve is distinct from the government,
although the gov't is concerned too...as GWB last week announced he needed a Swift and Temporary, "Stimulus Package" from congress, Pronto!
the action taken today was by the Federal Reserve for the benefit of the member banks...not for the aid of the citizens & savers & creditors