Fed to Make Direct Loans to Non-Financial Corporations

[Retire Soon]

In another act of desperation, the federal government will attempt to slow the slide in the stock market and revitalize the seriously malfunctioning credit markets by doing something it hasn't done since the depression; it will make direct loans to non-financial corporations.

The Fed will resurrect powers which haven't been used since the Great Depression which allow it to loan money to anyone "under unusual and exigent circumstances." This plan could put taxpayers on the hook for even more losses.

In the face of inflation that threatens the economy, the Fed may use another weapon in its arsenal which would be an interest rate cut. Interest rates, which are 2% could be cut even further. The last time rates were lower than they are now was during the 2001 recession. Ironically, low interest rates contributed to the housing bubble and our current economic crisis.

In light of the fact that the $700 Billion bailout of Wall Street has been ineffective in slowing the downward spiral of the stock markets, I would not be surprised to see interest rates lowered to 1% as early as Wednesday. What do you think?



Fed Will Lend Directly to Corporations - WSJ.com

[socca]

Quote:

Originally Posted by Retire Soon ...the federal government will attempt to slow the slide in the stock market...

It's not the gov'ts job to prop up the stock market. From my perspective, equity investors are speculators. They certainly deserve the gains they receive from the risks they take, but their losses are not the responsibility of taxpayers.

Quote:

Originally Posted by Retire Soon In the face of inflation that threatens the economy, the Fed may use another weapon in its arsenal which would be an interest rate cut.

The Fed normally raises its discount rate to dampen economic growth and thus inflation. Interest rates cuts usually increase the risk of greater inflation.

Quote:

Originally Posted by Retire Soon In light of the fact that the $700 Billion bailout of Wall Street has been ineffective in slowing the downward spiral of the stock markets...

The bailout hasn't yet been implemented. The promise of the pending bailout has done little to assuage investor fears. So, as an exercise in psychological engineering, the bailout is a failure (so far).

I'm in a disputatious mood this evening.

[cute fuzzy bunny]

Quote:

Originally Posted by Retire Soon In light of the fact that the $700 Billion bailout of Wall Street has been ineffective in slowing the downward spiral of the stock markets, I would not be surprised to see interest rates lowered to 1% as early as Wednesday. What do you think?

I think they havent spent a penny of that $700B yet, and the guys in ties dont want it if its going to cut into their golden parachutes and half million dollar retreats, so the fed has to spend it somewhere...