Thread: Fed Cuts Discount Rate, Says Dealers May Borrow (Update3)

U.S. Fed Cuts Discount Rate, Says Dealers May Borrow (Update3)

By Scott Lanman

March 16 (Bloomberg) -- The Federal Reserve, in an emergency weekend decision, cut the rate on direct loans to commercial banks and opened up borrowing at the rate to primary dealers in government securities.

In an announcement before the start of trading on the Tokyo Stock Exchange, the Fed lowered its so-called discount rate by a quarter of a percentage point to 3.25 percent. The central bank also approved the financing of JPMorgan Chase & Co.'s purchase of Bear Stearns Cos., including support for as much as $30 billion of Bear's assets.

Fed Chairman Ben S. Bernanke is stepping up efforts to keep strains in financial markets from spiraling into a full-blown meltdown. Last week the central bank agreed to emergency loans to a non-bank, Bear Stearns, for the first time since the 1960s. Fed officials also announced a program to swap $200 billion in Treasuries for debt including mortgage-backed securities.

``The Fed needed to act decisively, and I believe it has,'' said Chris Rupkey, chief financial economist at Bank of Tokyo- Mitsubishi UFJ Ltd. in New York. ``It is a crisis of confidence that these measures are trying to'' alleviate, he said.

The dollar tumbled to a 12-year low against the yen after the announcement and Treasury notes rallied in Asian trading. The Nikkei 225 Stock Average lost 3.1 percent at 9:35 a.m. in Tokyo.

From tomorrow, primary dealers will be able to borrow at the rate under a new lending facility, to be in place for at least six months, the Fed said. The Fed will accept a ``broad range'' of investment-grade collateral.

Bernanke Offers Assurances

``These steps will provide financial institutions with greater assurance of access to funds,'' Bernanke said during a conference call with reporters after the announcement.

Treasury Secretary Henry Paulson in a statement said ``I appreciate the additional actions taken this evening by the Federal Reserve to enhance the stability, liquidity and orderliness of our markets.''

Investors expect the Fed to lower its benchmark rate by as much as a full percentage point, to 2 percent, when policy makers meet March 18. That would exceed the 0.75-point emergency reduction on Jan. 22, which is the largest Since the overnight interbank lending rate became the main tool of monetary policy about two decades ago.

``Clearly, the Fed is trying to provide more liquidity to prevent a more vicious cycle and race to the bottom,'' said Gary Schlossberg, senior economist at Wells Capital Management in San Francisco, which oversees $200 billion. ``The problem is there's so much concern about credit quality that now there are solvency issues, and it's something the Fed has a more difficult time dealing with.''

Aimed at Liquidity

The actions are ``designed to bolster market liquidity and promote orderly market functioning,'' the Fed said in a statement. ``Liquid, well-functioning markets are essential for the promotion of economic growth.''

Today's steps indicate the Fed is increasingly concerned about the investor exodus from mortgage debt, which threatens to deepen the housing contraction and the economic slowdown.

New York Fed President Timothy Geithner said on the call that ``this is designed to help get liquidity to where it can help play an appropriate role in helping address the range of challenges facing particularly asset-backed securities markets.''

To contact the reporter on this story: Scott Lanman in Washington at slanman@bloomberg.net

Last Updated: March 16, 2008

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Ahhh, its all coming to fruition aye?

They can cut all the rates they want to, they can inject trillions or even everything worth anything into the financial market but it isn't going to do one bit of good. Its all going to collapse, thats the intention and thats when it'll stop. When the country is officially bankrupt that will be good. Then nobody will loan us money and we won't be able to print money out of thin air because it won't be worth anything. So, I guess all that government spending will have to stop one way or another.

If every American wanted to take their money out of the banks, they would never get it, because its gone, its not there! Where is it? Its in the hands of the globalist all over the world, even people that want you dead have your money.
Oh, I'm sure many of these corporations have thousands of offshore accounts with billions in them that nobody knows of, its like hide the money then file bancruptcy. Its amazing how all these Mega Corporations are going broke but the heads of these corporations are paying themselves hundreds of millions of dollars.

If the government can't prove you have it how are they gonna take it? If they don't know you have the seceret money stashed in accounts in the cayman islands or hidden in the swiss banks then how are they going to prove you scammed somebody? Yes, they might find out eventually but at this rate the feds would have to hire hundreds of thousands of auditors to sift through all the finanacial transactions which are probably billions of financial records and such. Then they would have to pin the money trail and timeline down and so on. In other words the government has gotten lazy and really doesn't enforce anything anymore. To Government its easier and more cost efficient just to bail people out instead of worrying about enforcing laws. Its cheaper to overlook than to build prisons, police and courtrooms. Just like with illegal immigration, just forget about it, make the best out of it, it doesn't matter if 60% of the people loose everything they have or get killed or raped or robbed, just get over it, life goes on. As Bush would say: "I know when Americans are down and out they will pull their bootstraps up and work hard and overcome this and then everything will be for the better in the long run."
I can only hope he wakes up in a comma somehow.

Can I start a scam like this too? This is like people printing their own stock certificates and claiming they're worth 10 times the print up cost just because somebody wrote a plan and actually went through the motions, even though they are in major debt, the profit is projected to materialize 3 or 5 years out but the projections could be falseified by the company issuing the stock to give them credibility so people buy them. And when the people buy them, they make tons of cash. Then the scam goes on a few years with promises of profits years down the road, the CEO's and corporate heads get paid millions, after the cool off period they sell their personal stock and then later the corporation sinks, everyone loses money except the corporation that issued the stock has done made their money right up front at the IPO. The CEO's and top brass have gotten paid the big saleries and sold their stocks, everything is good, except the little people that bought the stock usually through some financial portfolio management corporation that also has made money from the bogus stock, while the little people once again get shafted.

I know the stock market has historicly been a pretty good tool for Americans to make money and have sound investments but it seems the last few years have really sucked, basically since 9-11-01. I hate to sound so drab about the scenerio but My God, what is next? This country is going to ruin faster than any nation ever has gone to ruin. Its amazing how people are just leaving their money in these markets while they virtually disappear right before they're eyes. The stock market went from a stable and solid investment tool, to a virual Las Vegas crap shoot in the mid to late nineties and now its a circus ring toss or lottery game. It seems all stability and real investments paying a real financial gain for the average working investor has just disappeared. And as all these massive losses occur, the CEO's, big wigs, corporate heads and officers and top management and portfolio managers make the millions even as the crap hits the fan. Are people paying attention to this?

Once again the lawless corporate crooks rip the people off and this once again hurts the law abiding corporations because once there are many bogus scams going on, people start thinking maybe others that have said they are legitimate are scams as well.

What amazes me is, HOW LONG ARE PEOPLE GOING TO WATCH THEIR PORTFOLIOS DETERIORATE TO NOTHING before they pull their money out? If I had stocks I would have taken my cash out and bought real gold, not gold stocks or bonds, thats the same concept of buying stocks, someone controls your money. When you buy actual real gold that you can put in your hand, you control your wealth, not some bogus slick talker.