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This move has no benefit for equities

Discussion in 'Trading' started by detective, Dec 12, 2007.

Landis82
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Quote from scriabinop23:

whats with all these stupid postings? it seems like you are crying just to be educated a little.

If banks have an easier time obtaining funding without the discount rate usage stigma, then LIBOR comes down to match the fed fund rates. ARM mortgages and other consumer debt is tied to LIBOR. Then the consumer is less squeezed, and possibly the foreclosure situation is improved (even slightly is worth something).

And less foreclosures means higher value of subprime debt; which means less losses for banks (equities) and all of the correlated markets which are affected.

This is possibly as effective as a 75bp discount window cut, and shores up the dollar against some of the euro currencies.
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Excellent post!

#11 Dec 12, 2007

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