A Little Market Shake Up Is Needed
Aug 31st 2007ScottPolitics & Wyoming & conservatism
First, it was Mitt Romney. then it was we’re kicking off the primary season (sorta) . Now the Fed Chairman is set to make his speech from Jackson Hole today. An interest rate cut is expected to be announced.
The Fed, although it has not yet indicated that it will indeed lower the benchmark fed funds rate, has been adding cash to the banking system in an attempt to keep the credit markets liquid. The Federal Reserve Bank of New York said Wednesday it would inject $5.25 billion through a one-day repurchase agreement, in which it buys that amount in collateral from dealers who then deposit the money into commercial banks.
Wall Street has tumbled and rebounded erratically throughout the past weeks as investors have waited to see how the Federal Reserve reacts to the latest economic data and spreading failure of the subprime mortgage market.
Bernanke will give his speech Friday morning at Jackson Lake Lodge.
OK, some Wall Street opining here. There’s a number of folks out there that have too much house for their income/financial situations. On the other side of the coin, there’s some lenders out there that have made some pretty irresponsible moves by allowing folks to saddle themselves with a monstrous debt that will likely lead them to financial ruin. Granted, some folks can buckle down and scrimp and get through a near crisis, but there are plenty more that crash and burn.
That’s why I’m OK with the market feeling a little uneasy right now. Risky borrower/lender agreements need to be dealt with in an unsubsidized manner. The Fed throwing money at the market in order to save the mortgage industry from poor decisions about borrower applicants is a bad idea. It prevents the market from correcting its error. Just as the market corrected after shooting up beyond the 14K mark, so must it regarding this situation.
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