by Nicholai » Tue 18 Mar 2008, 17:11:44
LOL, America fails.
Canada pwns.......
But seriously you dumbasses are going to drag us down with you.
Why did we ever have faith in you and not diversify our export market?
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')Fed Cuts Main Rate to 2.25%, Says Outlook `Weakened' (Update3)
By Craig Torres
March 18 (Bloomberg) -- The Federal Reserve cut its main lending rate by three quarters of a percentage point to 2.25 percent as officials try to prop up the faltering economy and restore faith in the U.S. financial system.
``Today's policy action, combined with those taken earlier, including measures to foster market liquidity, should help to promote moderate growth over time and to mitigate the risks to economic activity,'' the Federal Open Market Committee said in a statement after meeting today in Washington.
Chairman Ben S. Bernanke is struggling to cushion consumers and companies from the worst of the credit freeze that's made some of the world's biggest banks reluctant to lend to each other. Officials also showed renewed concern about inflation, making a smaller reduction than traders anticipated. Two policy makers dissented in favor of ``less aggressive action.''
``Recent information indicates that the outlook for economic activity has weakened further,'' the Fed said. Still, ``inflation has been elevated, and some indicators of inflation expectations have risen,'' the Fed added.
The Fed Board of Governors also voted to lower the discount rate, the cost of direct loans from the central bank, to 2.5 percent.
Fisher, Plosser Dissent
Dallas Fed President Richard Fisher and Philadelphia Fed President Charles Plosser voted against today's decision.
Stocks extended their rally after retreating in the minutes after the decision was announced. The dollar jumped, while Treasury notes added to their decline.
``Relative to where inflation is running is where you begin to get the real tension between addressing the liquidity problems in the banks and the capital markets, and trying to encourage inflation to be under control for the long run,'' former Fed governor Susan Bies said in an interview with Bloomberg Television. `They are running very close, in this very high inflation environment, to how much they can deal with.''
The Fed has cut the benchmark lending rate by 2 percentage points this year, the most aggressive easing since the federal funds rate became an explicit target of policy in the late 1980s.
The decision follows a week of emergency actions by the U.S. central bank, which has pushed its $900 billion balance sheet into the front lines of market turmoil to quell a collapse of brokerage firms and market making in mortgage-backed securities.
Subprime Spillover
The Fed has lowered its benchmark overnight rate six times and the discount rate eight times since the middle of August, when the collapse of U.S. subprime mortgages started to infect markets around the world. The world's biggest financial companies have posted at least $195 billion in writedowns and credit losses tied to American mortgage markets as of March 14.
``It could be they went to 75 rather than 100, trying to buy off some dissenters,'' Lee Hoskins, former president of the Cleveland Fed, said in an interview with Bloomberg Television. ``I'm disappointed in the statement. They give a nod to Inflation, but make no serious effort to target it.''
Last week, the Fed said it would swap out some of its Treasury holdings for mortgage-linked bonds issued by government-sponsored enterprises such as Fannie Mae and by private companies. On March 14, the Fed extended an undisclosed amount of credit to Bear Stearns Cos. to stave off a collapse, invoking a little-used rule that allows the central bank to loan to non-bank corporations.
Increasing Roles
Two days later, the Fed expanded on that rule and set up a lending window for dealers in government bonds, similar to the lender-of-last-resort function it has traditionally reserved for banks.
The moves helped relieve some stress in credit markets. Yield differences on a Bloomberg index for Fannie Mae's current- coupon, 30-year fixed rate mortgage bonds and 10-year U.S. government notes narrowed about 22 basis points to 176 basis points, or 61 basis points less than the 22-year high reached two weeks ago.
Still, mortgage lending will tumble to an eight-year low this year and house prices will continue to decline, according to the Mortgage Bankers Association.
Mounting foreclosures are adding to the glut of unsold homes, and that is driving down property values. Home prices in 20 U.S. metropolitan areas fell in December by the most on record. The S&P Case-Shiller home-price index dropped 9.1 percent from December 2006.
