its like a crack addict getting a fix then the market is super happy for a while then when the "high" (literally haha) wears off, the crack addict has to start looking for a new fix (another rate cut) humorous what happens when we are down to 3% or 2% rates and things are still the same? subprime borrows cant pay because they cant pay, not because rates are too high lol
Unless Bush Admin attacks Iran and issues Executiver Order declaring "Emergency Situation" and postpones election. :eek:
Good post and an excellent comment! The treasury, the Fed, the administration, the banks, the investment banks etc are all in denial of this basic fact. It will bite them on the arse eventually.
Rate cuts dont have a thing to do with subprime - the Fed can't cut the Libor rate - which is going up, not down, as BOE recklessly drives the Brit economy into the ground. Trainwreck of the decade coming right there. Too, the Paulson freeze even if he gets it in will do nothing for the simple reason that the borrowers for the past two years anyway have negative equity. They'd be fools to accept any rate freeze - they should just walk away - and the smart ones will. This is all about the credit crunch spreading through credit, interbank lending and rate markets. If you're still stuck on subprime and moaning about idiot borrowers and bailouts for them, you're six months behind the curve. The Fed needs to violently drive rates down in my view - near 3% for starters. Even more important, is somebody has to redesign the whole range of securitization instruments to restore confidence. This isn't happening. When this is over, the low rate model of the US and Japan will be the winners and Euroland the laughingstocks I say.
How will rates @ 3% help? It will just cause even more people to borrow even more money and you'll still be at square one.
The key is that structured finance is so broken and lost so much credibility that traditional channels of credit expansion are broken. Easing is great, buts its really wall street who has to reliquefy and they are not in a great position right now.
Excellent Commentary... .................................................................................... And the lawsuits have not even started yet....Some lawyers are going to make a fortune... Adding significantly to this debacle...