Wall Street Manna

An irreverent look at Wall Street

Monday, September 15, 2008

Fed Interest rate decision tomorrow

They need to cut at least 50 basis points. Steve Liesman, of CNBC already said that the Fed would prefer to stay pat, and see what the effect of their latest stimulus.

Are they kidding me? Even PIMCO got dinged today, because of their holdings Lehman bonds.
http://www.bloomberg.com/apps/news?pid=20602007&sid=atys50sprMvE&refer=govt_bonds

Anyone see McCulley having a fit on CNBC? And the Fed thinks they have time?

Federal Reserve policy makers meet Tuesday to set their interest-rate target for the rest of this month and next. With deepening worries in markets, they're being forced to look much farther down the road to determine when the economy might emerge from its turmoil.

The Fed has been widely expected to leave the federal-funds rate unchanged at 2% into 2009. But the trouble around Lehman Brothers Holdings -- and fears about global financial turmoil because of it -- led futures markets late Sunday to put split odds on a rate cut. The Fed, however, has resisted responding to recent market turmoil with more rate cuts.

http://online.wsj.com/article/SB122144068619034567.html

Federal Reserve officials aren't inclined to veer from plans to hold short-term interest rates steady at Tuesday's meeting, even though financial markets put rising odds on a quick rate cut following the weekend's drama on Wall Street.

But concern about deteriorating markets and financial institutions could quickly prompt a change of heart among Fed officials or lead them to use their end-of-meeting statement to open the door to more rate cuts.

http://online.wsj.com/article/SB122149705087936997.html?mod=hpp_us_whats_news

Today Bush said the financial markets are sound. That sounds like what we heard a year ago. That sub-prime is contained.

The rest of the economy has head up reasonably well. Or so the officials would have us to believe. They couldn't get sub-prime right; why would you think they have a handle on the "real" economy?

If they don't cut, they'll sell this market. And then, the Fed will want a do-over and they will promptly ban short selling Wednesday morning with the help of the SEC!

Why would they do that? Because the Fed is now going to take stocks for collateral at the window, despite Section 23A.

Most importantly, a bank may not purchase a low-quality asset (generally a classified or past-due asset) from an affiliate or accept a low-quality asset as collateral for a loan to any affiliate.
http://www.clevelandfed.org/Statistics/ppts/LargeBankConference/pdf/handouts23AandB.pdf

Right now the bears are firmly in control of this market. And why shouldn't they be? They're the ones that are making all the money.

So does anyone really think that when some of these administration cheerleaders come out, that we'll actually respect their views?

Every time, they come out and lie. The only question is the degree of the maliciousness!

The Fed has time?

They have until 2:15 tomorrow.

That's how much time they have!

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