Bernanke answers the call to lower rates. We’re already hearing mixed reactions ranging from “it’s not enough” to “he shouldn’t have made a cut.”
What’s your take? I’m no Realtor and I’m not a lender, so I’d love to hear what everyone thinks. Comments are encouraged.
David G says:
First, Lani, I can explain very simply why this is happening; I closed on my first mortgage in late June so we have Murphy’s law to thank for rates falling almost every week since then.
On a more serious note though, I don’t understand why Benanke seems to pay no attention to the weakness of the dollar that follows these rate cuts. I moved here from S. Africa in part to earn a stronger currency – now I could hardly afford to move ‘home’ if I wanted to. Murphy again. Moral of the story; if you want to know where to invest just do the opposite of everything I do.
August 17, 2007 — 9:22 am
Rodney Coty says:
This is something that needed to be done. Is it enough to get us out of the mess we are in? No. It will gain some buyer confidence. The media is just destroying the real estate industry right now. It will also get the people that are on the fence to move. We will see what happens.
August 17, 2007 — 9:28 am
Ned Didry says:
Welcome to Calamity.
They’ve confirmed that this is, indeed, “calamity”:
“Poole Says Only ‘Calamity’ Would Justify Rate Cut Now…”
That’s from only a little over 24 hours earlier on Bloomberg and the story is still sitting on their site. Poole didn’t slice-and-dice any distinctions in what kind of rate cut. Wonder if the “calamity” has anything to do with the reported 1930s-style bank run on Countrywide.
The economy is controlled by mouth-foaming mad dogs. Go buy some stocks.
August 17, 2007 — 9:45 am
Aaron says:
This is some thing that should have been done before we got into this situation. Bernanke does not seem to understand what to consider when looking at inflation.
August 17, 2007 — 10:13 am
Shannon Hubbard says:
There was at least one national news channel that reported incorrectly on this rate cut early this morning. It’s only the discount rate, not the federal funds rate, that the Federal Reserve cut by a half point. The federal funds rate may still be lowered in September. I agree with Rodney – this won’t fix the mortgage problem and it’s not a magic pill for the real estate slump. But it will give the media something positive to talk about for a day or so, and that will hopefully improve consumer confidence a little.
August 17, 2007 — 11:07 am
Lani Anglin says:
Shannon, I think I side with you (and the Bloomberg report clarified that it’s the discount rate, but you’re right- some people probably won’t read it!). It isn’t a magical fix, but for Pete’s sake- the mainstream news anchors finally have to say SOMETHING good about the market!
The phones are already ringing with a couple of buyers who were waiting to see what Bernanke would do before they committed- is anyone surprised?
August 17, 2007 — 11:32 am
Robert Kerr says:
My take? Surprised!
I think this will cause more harm than good, in the long run. We have to stop using monetary policy to distort the markets.
Let them correct. We will all be healthier for it.
August 17, 2007 — 12:40 pm
Brian Brady says:
“We have to stop using monetary policy to distort the markets.”
Why do we even have the Fed, Robert? I appreciate a laissez-faire policy as much as the next guy but the Fed is supposed to be active in times of financial crisis.
Today’s move was symbolic and demonstrative of a change of Fed bias. The discount window hasn’t been opened since 9-11. The move, in itself, won’t relieve all of the pressure anemic mortgage banks have but it certainly shows that our Fed is prepared to deal with the possibility of deflation.
August 17, 2007 — 8:24 pm
Sam Chapman says:
I agree with Shannon in that the cut won’t do much for economy, which is running strong, but it will boost consumer confidence. Speaking of the press, the economy is roaring right along, but all the press seems to want to focus on is the “horrible” real estate market.
August 18, 2007 — 6:26 am
Robert Kerr says:
Shame on you, Brian! Adam Smith is wagging the index finger of his Invisible Hand at you right now.
And Sam, there are some troubling, mixed signals in the data regarding the health of the economy. If you ignore the labor data (almost certainly corrupted by the BLS’ birth/death model) the next 6-12 mos look precarious.
August 18, 2007 — 8:59 am
John L. Wake says:
Beyond the think-talk about macro economic policy, it’s good for me and my clients, both sellers and buyers.
August 18, 2007 — 11:44 am
NYCJoe says:
So, to be clear, the Fed only cut the discount rate – the rate at which they lend to banks.
The Fed Funds rate remains at 5.25 percent, and probably will. This will have no effect on the rates paid by consumers.
August 18, 2007 — 1:24 pm
NYCJoe says:
Brian,
The reason we have a Fed is so that they can focus on price stability, not financial market stability.
Business cycles are a fact of life.
August 18, 2007 — 1:42 pm
NYCJoe says:
Why a Fed Rate Cut Won’t Help
August 21, 2007 — 8:53 pm