Why the Fed's rate cuts won't help you

By
Services for Real Estate Pros with Negrete's Notary Service Inc.

Why the Fed's rate cuts won't help you

SuperModels3/18/2008 2:15 PM ET (reprint)

 In its efforts to keep irresponsible bankers on Wall Street afloat, the Federal Reserve is spurring inflation, crippling the dollar and cutting into retirees' incomes. And mortgages and car loans won't get any cheaper.

The Federal Reserve today continued its attempt to get out in front of the worst financial crisis to hit the world banking system in five decades by slashing short-term interest rates by three-quarters of a percentage point, to 2.25%, the lowest level since 2004.

But the Fed's effort will have little effect on the ability of the average American to get a cheap loan for a new home, car or college education even as it has a large effect on U.S. banks' ability to fix their balance sheets by racking up fat profits.

If that sounds unfair, welcome to the latest episode of a brutal new American business ethic, in which the government bails out bad bets by risk-taking banking executives in New York with money that it borrows from middle-class families and foreign investors. The effort is gilded with fancy financial language and cloaked in the guise of a rescue that helps all citizens, but the reality is that Washington is essentially robbing the poor to help the rich.

It seems odd, but these are extraordinary times. Normally, when the Federal Reserve cuts the rate at which it lends money to U.S. banks, those banks in turn cut the rates at which they lend money to citizens and companies for personal and commercial use. Simple enough. Yet in the past few months, banks have made three important changes in their usual practice:

  • They have not been passing all of their interest-rate savings to customers.
  • They have restricted lending only to most creditworthy, documented applicants.
  • They have cut the total amount they're willing to lend.

Good for banks, bad for you

Banks are taking these seemingly perverse steps in an effort to reverse the effects of the massive losses they have withstood for lending too broadly to consumers and companies with lousy credit over the past five years.

They're pulling a big 180, which is as confusing as it is disheartening. Rather than providing funds to prospective home buyers and business people with legitimate needs for moving into larger homes or expanding factory lines, records show the banks are hoarding the low-cost money they're borrowing from the Fed and investing it in Treasury bonds paying higher interest yields. They're then pocketing the windfall profits to repair their own ravaged balance sheets.

Well, that's the latest on the current mortgage and financial crises facing the nation right now. The question is, what can you do about it?

That's the reason it is more important than ever before to increase your credit scores and resolve credit problems as soon as possible. This trend will not end any time soon. Learn what you need to know about credit, how to optimize it, how to maintain it and, most importantly, what not to do. Many people do things they think will improve their credit, but ends up having the opposite result. My company teaches you all of this and more. We teach you what you need to know to be among the "most creditworthy." Call us today.

Have a great day,SuperModels3/18/2008 2:15 PM ET (reprint)

 In its efforts to keep irresponsible bankers on Wall Street afloat, the Federal Reserve is spurring inflation, crippling the dollar and cutting into retirees' incomes. And mortgages and car loans won't get any cheaper.

The Federal Reserve today continued its attempt to get out in front of the worst financial crisis to hit the world banking system in five decades by slashing short-term interest rates by three-quarters of a percentage point, to 2.25%, the lowest level since 2004.

But the Fed's effort will have little effect on the ability of the average American to get a cheap loan for a new home, car or college education even as it has a large effect on U.S. banks' ability to fix their balance sheets by racking up fat profits.

If that sounds unfair, welcome to the latest episode of a brutal new American business ethic, in which the government bails out bad bets by risk-taking banking executives in New York with money that it borrows from middle-class families and foreign investors. The effort is gilded with fancy financial language and cloaked in the guise of a rescue that helps all citizens, but the reality is that Washington is essentially robbing the poor to help the rich.

It seems odd, but these are extraordinary times. Normally, when the Federal Reserve cuts the rate at which it lends money to U.S. banks, those banks in turn cut the rates at which they lend money to citizens and companies for personal and commercial use. Simple enough. Yet in the past few months, banks have made three important changes in their usual practice:

  • They have not been passing all of their interest-rate savings to customers.
  • They have restricted lending only to most creditworthy, documented applicants.
  • They have cut the total amount they're willing to lend.

Good for banks, bad for you

Banks are taking these seemingly perverse steps in an effort to reverse the effects of the massive losses they have withstood for lending too broadly to consumers and companies with lousy credit over the past five years.

They're pulling a big 180, which is as confusing as it is disheartening. Rather than providing funds to prospective home buyers and business people with legitimate needs for moving into larger homes or expanding factory lines, records show the banks are hoarding the low-cost money they're borrowing from the Fed and investing it in Treasury bonds paying higher interest yields. They're then pocketing the windfall profits to repair their own ravaged balance sheets.

Well, that's the latest on the current mortgage and financial crises facing the nation right now. The question is, what can you do about it?

That's the reason it is more important than ever before to increase your credit scores and resolve credit problems as soon as possible. This trend will not end any time soon. Learn what you need to know about credit, how to optimize it, how to maintain it and, most importantly, what not to do. Many people do things they think will improve their credit, but ends up having the opposite result. My company teaches you all of this and more. We teach you what you need to know to be among the "most creditworthy." Call us today.

Have a great day,
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