The cut of half of percent of the discount window doesn't mean too much ... Banks are reluctant to use it because of the stigma that comes with it. It's a signal for everybody else that they're in distress. For instance last week only $10 mil were borrowed from the FED. Since nobody cares about the discount window why the cut?
Good point. I think the strategy they are using is "jawboning". In order to force shorts to cover and prevent a friday waterfall decline and a monday gap down open that forces many overleveraged players from throwing in the towl. The fed prefers that they keep gambling.
the cut was symbolic, but the statement that went along with it extended the terms of 30 days (OR MORE AT THE BORROWER'S DISCRETION: read this as the vault will remain unguarded so take what you need) and expanded the types of crap that the Fed. would take as collateral............. this is a colossal subsidy or bailout and anyone who saves money gets hosed since inflation will roar
To suck all of Cramer's viewers back into the market, then whack them to new lows at another 200 points from here.
No, it's not a colossal subsidy. It's the Fed doing its job: acting as the backstop reserve for the nation's banks. An infusion of reserves in a crisis situation isn't going to cause inflation. All it does is prevent some bank somewhere that might have needed it from going under and needing to have its depositors rescued by the FDIC. If things work out for whatever bank it might have been, they get to last long enough to be taken over by another, healthier bank. If not, they get to fold, and the FDIC gets to pay off the depositors.
I dont know, we've had 5 years of low rates for all kinds of hedge funds to get going and someone on CNBC claimed there are 10,000 of them.... even a small percentage that go bust can add up and it's not known how many are in trouble.... all this talk of the Fed not bailing out anyone will morph into an RTC entity to mop up the blood.... and freddie and fannie will take on some of it..... a return to the '83 bust where people were buying condos with credit cards at RTC auctions???? how do I know??? I bought one...