Update: Markets stabilize for now after emergency rate cut

[JTD]

AP
Fed OKs Reducing Discount Rate on Loans
Friday August 17, 9:52 am ET
By Martin Crutsinger, AP Economics Writer
Federal Reserve Approves Half-Percentage Point Cut in Discount Rate on Loans to Banks


WASHINGTON (AP) -- The Federal Reserve approved a half-percentage point cut in its discount rate on loans to banks Friday, a dramatic move designed to stabilize financial markets roiled by a widening credit crisis.

The action had an immediate positive impact, sending stocks soaring on Friday right at the opening bell. The Dow Jones industrial average surged by more 300 points at the start of trading.

The decision means that the discount rate, the interest rate that the Fed charges to make direct loans to banks, will be lowered to 5.75 percent, down from 6.25 percent.

The Fed did not change its target for the more important federal funds rate, which has remained at 5.25 percent for more than a year. Friday's move was not expected to have an immediate impact on consumer borrowing.

[coriolis]

The hard times will come soon enough. I personally cannot wait until there is a run on the banks.

Just curious, why? As the board's resident cynic, are you looking forward to the fireworks? Come on, there has to be more to it. You can't throw out such a stink bomb and just walk.
Not trying to start a fight - I always like to hear divergent views.

[M_0331]

Countrywide has my mortgage loan also. What happens to it if Countrywide shuts down. Countrywide is the # 1 mortgage company.
Also I read in financial news that a lot of mortgage companies are now requiring credit scores(FICO) to be >720. They are taking prime customers only; no Alt-a or subprime. This will stop a lot of people from buying a home. I think the fed bank loan rate being set lower is just a stopgap move. The recent decline in home value has trapped a lot of people from refinancing their 0% down loans and adjustable rate loans causing high # of them to default. My money is presently out of the equity(stock) money market now and in short term 6% CD's. I am not getting back into equity till the market gets over this mortgage crisis.

[Stephanie]

Someone else will buy those mortgages from Countrywide if it shuts down. I don't think that they will. They are probably selling some of those mortgages already for an influx of cash.

I'm still in the equity market - buy low and sell high. My 401k & IRA portfolios are about 70% stocks, the rest bonds and cash. I'm not retiring until 67 - at least that's when I can per the government for full SS benefits. I still have a ways to go so I'm in the equity market for the long haul.

[M_0331]

Shows good , I already retired @ 58 Blessed by good 401K & inheritance & good work pension, so I tread lightly in equity.

[Stephanie]

Shows good , I already retired @ 58 Blessed by good 401K & inheritance & good work pension, so I tread lightly in equity.

The closer I get to retirement, the less equity I will have.