WASHINGTON - A lot has changed since the Federal Reserve hinted two months ago that it might be finished cutting interest rates for a while. Credit has become harder to obtain, Wall Street has convulsed again and the housing slump has intensified. As a result, policymakers at the central bank now appear to have changed their minds about the need to drop interest rates again.
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The Fed had cut rates twice this year and officials suggested in October that might be enough to help the economy survive the credit and housing stress. Then the problems snowballed, leading Fed Chairman Ben Bernanke to signal that one more cut might be needed.
Analysts expect the Fed to trim its key rate, now at 4.5 percent, by one-quarter of a percentage point at the meeting Tuesday. Some even speculate about the possibility of a half-point cut.
Banks, financial companies and other investors who made loans to people with spotty credit or put money into securities backed by those subprime mortgages have lost billions of dollars. Investors in the U.S. and abroad have grown more wary of buying new debt, thereby aggravating the credit crunch.
All this has added to the turmoil on Wall Street, and Bernanke and other Fed officials say they must take it into account when deciding their next move.
But does lowering rates mean the Fed essentially is bailing out investors or encouraging more sloppy decision-making? In other words, what exactly is the Fed's job?
Bernanke and other Fed officials say it is to make policy that keeps the economy growing and inflation low, a stable climate that benefits individuals, businesses and investors. The Fed also has a responsibility to ensure the banking system is sound and financial markets run smoothly.
"There is a link between Wall Street and Main Street. The Fed is taking the right actions, but they should be careful," said Victor Li, an economics professor at the Villanova School of Business.
I'll go right ahead and say it - the Fed is looking at bailing out those idiots who tried to live above their means - and it's going to bite the rest of us in the collective ass.
No one forced those morons to go out and get sub prime mortgages whose payments would balloon up to beyond what they could afford in a year or five, no one told them to go get the 5000 sqft homes with five bedrooms and stock it with Italian flooring, multiple large screen plasma TV's, and a stripper pole in the game room. If they were not responsible enough to realieze, "hey, my family of three only needs a, at most three bedroom home, and I don't have to have top of the line imported flooring and paneling. I can make do with a nice 2000sqft place over in this nice neighborhood which won't cost me $300,00." Obviously I've simplified or even glossed over entire tracts due to my frustration at this point, but I think the point still is clear.
At anyrate, the last time they dropped the Interest percentage, the dollar fell through the floor, the Economy NEEDS for it to be corrected if we're to do anything, - if some idiots have to move out of their fancy overpriced houses and into smaller apartments or rent homes, or if some people have to (gods forbid) pay back their credit card debt they stupidly ran up.....well, to bad.
Why does it seem, in the last year of his Administration, Bush's people are trying to run this country into the shithole worse than it already is?
