The Federal Open Market Committee decided today to establish a target range for the federal funds rate of 0 to 1/4 percent.
Since the Committee's last meeting, labor market conditions have deteriorated, and the available data indicate that consumer spending, business investment, and industrial production have declined. Financial markets remain quite strained and credit conditions tight. Overall, the outlook for economic activity has weakened further.
Meanwhile, inflationary pressures have diminished appreciably. In light of the declines in the prices of energy and other commodities and the weaker prospects for economic activity, the Committee expects inflation to moderate further in coming quarters.
The Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability. In particular, the Committee anticipates that weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time.
The focus of the Committee's policy going forward will be to support the functioning of financial markets and stimulate the economy through open market operations and other measures that sustain the size of the Federal Reserve's balance sheet at a high level. As previously announced, over the next few quarters the Federal Reserve will purchase large quantities of agency debt and mortgage-backed securities to provide support to the mortgage and housing markets, and it stands ready to expand its purchases of agency debt and mortgage-backed securities as conditions warrant. The Committee is also evaluating the potential benefits of purchasing longer-term Treasury securities. Early next year, the Federal Reserve will also implement the Term Asset-Backed Securities Loan Facility to facilitate the extension of credit to households and small businesses. The Federal Reserve will continue to consider ways of using its balance sheet to further support credit markets and economic activity.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Christine M. Cumming; Elizabeth A. Duke; Richard W. Fisher; Donald L. Kohn; Randall S. Kroszner; Sandra Pianalto; Charles I. Plosser; Gary H. Stern; and Kevin M. Warsh.
In a related action, the Board of Governors unanimously approved a 75-basis-point decrease in the discount rate to 1/2 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of New York, Cleveland, Richmond, Atlanta, Minneapolis, and San Francisco. The Board also established interest rates on required and excess reserve balances of 1/4 percent.
mortgage backed securities, you can look for substantially lower rates. This is the move that may really spur home sales. Here is the press release from the Fed...
Press Release
Release Date: November 25, 2008
For release at 8:15 a.m. EST
The Federal Reserve announced on Tuesday that it will initiate a program to purchase the direct obligations of housing-related government-sponsored enterprises (GSEs)--Fannie Mae, Freddie Mac, and the Federal Home Loan Banks--and mortgage-backed securities (MBS) backed by Fannie Mae, Freddie Mac, and Ginnie Mae. Spreads of rates on GSE debt and on GSE-guaranteed mortgages have widened appreciably of late. This action is being taken to reduce the cost and increase the availability of credit for the purchase of houses, which in turn should support housing markets and foster improved conditions in financial markets more generally.
Purchases of up to $100 billion in GSE direct obligations under the program will be conducted with the Federal Reserve's primary dealers through a series of competitive auctions and will begin next week. Purchases of up to $500 billion in MBS will be conducted by asset managers selected via a competitive process with a goal of beginning these purchases before year-end. Purchases of both direct obligations and MBS are expected to take place over several quarters. Further information regarding the operational details of this program will be provided after consultation with market participants.
Meredith Whitney the most reliable of the banking analysts told the New York Post today that Citigroup is in big trouble and their CEO Vikram Pandit is wrong in thinking he can survive in its current form.
"Pandit is wrong, Citi will not be able to stay in its current form," she said, adding that the banking giant must break itself up and sell off the pieces to raise capital and reduce its size.....
"Citigroup is in such a mess Stephen Hawking couldn't turn this company around," the money maven added. "It has lost the most money of all the banks, and has the greatest leverage."....
"Citi is wrong if they say they are adequately capitalized. No bank is adequately capitalized today and Citi is no exception," she said...."
This will get ugly quick and it looks like the government will get involved soon...
Meredith Whitney the most reliable of the banking analysts told the New York Post today that Citigroup is in big trouble and their CEO Vikram Pandit is wrong in thinking he can survive in its current form.
"Pandit is wrong, Citi will not be able to stay in its current form," she said, adding that the banking giant must break itself up and sell off the pieces to raise capital and reduce its size.....
"Citigroup is in such a mess Stephen Hawking couldn't turn this company around," the money maven added. "It has lost the most money of all the banks, and has the greatest leverage."....
"Citi is wrong if they say they are adequately capitalized. No bank is adequately capitalized today and Citi is no exception," she said...."
This will get ugly quick and it looks like the government will get involved soon...
It will be difficult for the U.S. Government to allow another day of market turmoil for this financial behemoth. Paulson and Bernanke are, no doubt, trying to broker a private deal for them, but it wouldn't surprise me to see some sort of bridge loan or backstop similar to AIG or Fannie/Freddie. Look for this to occur before the Russian/Asian market open tonight, EST.
It will be difficult for the U.S. Government to allow another day of market turmoil for this financial behemoth. Paulson and Bernanke are, no doubt, trying to broker a private deal for them, but it wouldn't surprise me to see some sort of bridge loan or backstop similar to AIG or Fannie/Freddie. Look for this to occur before the Russian/Asian market open tonight, EST.
It will be difficult for the U.S. Government to allow another day of market turmoil for this financial behemoth. Paulson and Bernanke are, no doubt, trying to broker a private deal for them, but it wouldn't surprise me to see some sort of bridge loan or backstop similar to AIG or Fannie/Freddie. Look for this to occur before the Russian/Asian market open tonight, EST.
It will be difficult for the U.S. Government to allow another day of market turmoil for this financial behemoth. Paulson and Bernanke are, no doubt, trying to broker a private deal for them, but it wouldn't surprise me to see some sort of bridge loan or backstop similar to AIG or Fannie/Freddie. Look for this to occur before the Russian/Asian market open tonight, EST.
It had been a few days without a day new Fed funding facility ... From the Fed: Federal Reserve announces the creation of the Money Market Investor Funding Facility (MMIFF) The Federal Reserve Board on Tuesday announced the creation of the Money Market Investor Funding Facility (MMIFF), which will support a private-sector initiative designed to provide liquidity to U.S. money market investors.
From the Fed...
Press Release
Release Date: October 21, 2008
For release at 9:00 a.m. EDT
The Federal Reserve Board on Tuesday announced the creation of the Money Market Investor Funding Facility (MMIFF), which will support a private-sector initiative designed to provide liquidity to U.S. money market investors.
Under the MMIFF, authorized by the Board under Section 13(3) of the Federal Reserve Act, the Federal Reserve Bank of New York (FRBNY) will provide senior secured funding to a series of special purpose vehicles to facilitate an industry-supported private-sector initiative to finance the purchase of eligible assets from eligible investors. Eligible assets will include U.S. dollar-denominated certificates of deposit and commercial paper issued by highly rated financial institutions and having remaining maturities of 90 days or less. Eligible investors will include U.S. money market mutual funds and over time may include other U.S. money market investors.
The short-term debt markets have been under considerable strain in recent weeks as money market mutual funds and other investors have had difficulty selling assets to satisfy redemption requests and meet portfolio rebalancing needs. By facilitating the sales of money market instruments in the secondary market, the MMIFF should improve the liquidity position of money market investors, thus increasing their ability to meet any further redemption requests and their willingness to invest in money market instruments. Improved money market conditions will enhance the ability of banks and other financial intermediaries to accommodate the credit needs of businesses and households.
The attached term sheet describes the basic terms and operational details of the facility.
The MMIFF complements the previously announced Commercial Paper Funding Facility (CPFF), which on October 27, 2008 will begin funding purchases of highly rated, U.S.-dollar denominated, three-month, unsecured and asset-backed commercial paper issued by U.S. issuers, as well as the Asset Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (AMLF), announced on September 19, 2008, which extends loans to banking organizations to purchase asset backed commercial paper from money market mutual funds. The AMLF, CPFF, and MMIFF are all intended to improve liquidity in short-term debt markets and thereby increase the availability of credit.
Since this credit crisis, I have thought what we need is more education regarding financial matters. We, at the Manders Group, have decided that we would like to help high school kids in our area, state and region become more financially educated. We are donating a $200 scholarship to the "Secure Student" for any parent with a high school child that would like to enroll in this program. I have become very active in the Financial Education community and feel that this is a way to give back. Read about the program below and e-mail me(e-mail address on the right side of this page) so I can give you the code for the $200 discount...
Here is a recent blog at the "Frugal Dad..."
The following guest post is from Mike Young, Founder and CEO of The S.E.C.U.R.E. TM student program. You can learn more about Mike, and the The S.E.C.U.R.E.TM student program at his website.
The media today is focused on the $700 Billion bailout on Wall Street and the credit crunch. However, what has become very clear in the eyes of many is that the real problem is with the foundation of our educational system.
Remember all of the neat stuff you learned in high school about credit and money? If you are like me, you don't, because there was no education on how credit and money actually worked. The average kid today will see over 360,000 advertisements before the age of 18 while receiving less than 10 hours of formal education on financial literacy.
CNBC reported that the real problem with the adult population today, is they were never taught this stuff in school. This leads us to an entire generation of consumers with a -2% savings rate. The average American has less than $3800 in savings and an average credit card balance of $9,200!
Marketing and advertising has been working full steam ahead since the 1950's and it's about time that our educational system begins to make sweeping changes to help high school kids develop positive habits with credit and money before they leave home.
It's time for our society to begin making an impact on the next generation, teaching them lessons we've learned the hard way. It's time to make a difference and consume less while saving more. We can turn this ship around, but it's going to take a group effort at the community level and begin getting involved now.
Frugal Dad's Thoughts: I couldn't agree more with Mike's message, and his organization's mission. As a society, we do a poor job at preparing our youth to take the next step to become fiscally responsible citizens. Think about it-we spend countless hours of instruction preparing students for fitness through health classes, gym and physical education. We spend many more hours teaching students proper grammar, in both English and foreign languages. Rather than teaching them how to take tests, or prepare for college, perhaps we should focus our efforts on preparing students for life. Some basic courses in personal finance including lessons such as how to balance a checkbook, how to manage credit, how taxes work, etc. would go a long way towards creating a better prepared group of high school graduates.
Disclaimer: ActiveRain Corp. does not necessarily endorse the real estate agents, loan officers and brokers listed on this site. These real estate profiles, blogs and blog entries are provided here as a courtesy to our visitors to help them make an informed decision when buying or selling a house. ActiveRain Corp. takes no responsibility for the content in these profiles, that are written by the members of this community.
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