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Fed's Yellen Says Rates Could Reach Zero in Weak Economy (finally, free money)
Mortgage News Daily ^ | 10/30/08 | Steve Stecyk

Posted on 10/31/2008 7:29:16 AM PDT by TigerLikesRooster

Fed's Yellen Says Rates Could Reach Zero in Weak Economy

San Francisco Federal Reserve President Janet Yellen said the Fed could lower rates below 1%, and that they could reach as low as zero amid a weak economy.

Speaking at an event hosted by the University of California at Berkley and UCLA, Yellen said that loan rates would be substantially higher without the Federal Reserve's aggressive rate cuts.

"We've seen very tentative signs of an easing of stress in money markets," Yellen said, pointing to lower LIBOR-OIS and credit default swap spreads. "However, these spreads remain at levels that are well above normal and other measures of stress have risen even further. Clearly, we have a long way to go before the credit crunch shows significant healing."

Although inflation risks have diminished greatly, recent economic data is "deeply worrisome", she said.

She added that it is worth considering other types of policies to address the crisis.

Yellen said that the credit crunch is one of the factors affecting consumer spending, and added that the credit crisis is also dragging local governments "deeper into the financial mess".

Yellen commented that fed's liquidity steps are "extremely constructive" and that credit markets will thaw over time. She noted that there are "very tentative signs" that money market stress is easing.

Yellen also acknowledged that the Fed's bailout package is a key step in breaking the economy's negative momentum.

On housing, Yellen said a bottom is "not yet in sight" and that the Federal Reserve should give more direct assistance to homeowners.

In a question and answer session following her speech, Yellen said adopting policies that recreate a bubble condition is "not wise" and that there is the danger of an "over-correction" in housing.

By Steve Stecyk and edited by Stephen Huebl


TOPICS: Business/Economy; Front Page News; News/Current Events
KEYWORDS: 0interest; fed; liquidity; yellen

1 posted on 10/31/2008 7:29:17 AM PDT by TigerLikesRooster
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To: PAR35; TigerLikesRooster; bamahead; AndyJackson; Thane_Banquo; nicksaunt; MadLibDisease; ...

Ping!


2 posted on 10/31/2008 7:29:43 AM PDT by TigerLikesRooster (kim jong-il, chia head, ppogri, In Grim Reaper we trust)
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To: TigerLikesRooster

Woo Hoo!/s


3 posted on 10/31/2008 7:31:38 AM PDT by murphE ("It is terrible to contemplate how few politicians are hanged." - GK Chesterton)
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To: TigerLikesRooster

Next step ... “Just gimme the damn money!”


4 posted on 10/31/2008 7:33:05 AM PDT by TexGuy (If it has the slimmest of chances of being considered sarcasm ... IT IS!)
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To: TigerLikesRooster
Free Money?

What are you, an Obama/ACORN Troll ;-)

It could still go negative...

5 posted on 10/31/2008 7:33:11 AM PDT by King Moonracer (Bad lighting and cheap fabric, that's how you sell clothing.)
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To: TigerLikesRooster

Welcome to Argentina !


6 posted on 10/31/2008 7:34:16 AM PDT by se_ohio_young_conservative (Sarah for VP !)
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To: TigerLikesRooster
The Fed is becoming the world's largest "take a penny, leave a penny" tray.
7 posted on 10/31/2008 7:35:37 AM PDT by KarlInOhio (Obama: Spread the Wealth = Marx: From each according to his ability, to each according to his needs)
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To: TigerLikesRooster

I’ve been wondering about this for a while. You can only cut rates so much until there’s nothing to cut...


8 posted on 10/31/2008 7:37:05 AM PDT by ctdonath2 (I AM JOE THE PLUMBER!)
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To: TigerLikesRooster

Didn’t Japan try 0% interest rates with no effect?


9 posted on 10/31/2008 7:42:23 AM PDT by vietvet67
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To: TexGuy

I’d like a fresh stack of $100 bills delivered to my front door once a month, oh yeah....that Black woman on NBC6-Orlando is going to love this idea!/s


10 posted on 10/31/2008 7:42:57 AM PDT by Frank_2001
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To: TigerLikesRooster

0% is biblical, right?


11 posted on 10/31/2008 7:48:17 AM PDT by polymuser (God bless and keep America.)
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To: ctdonath2
I’ve been wondering about this for a while. You can only cut rates so much until there’s nothing to cut...

Japan could tell us how well this works...

12 posted on 10/31/2008 7:48:41 AM PDT by GOPJ (Ayers book: "Prairie Fire" was dedicated cop killers and Sirhan Sirhan -( RFK' assassin.))
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To: TigerLikesRooster

I’m holding out for a deal where they pay me to borrow.


13 posted on 10/31/2008 7:51:27 AM PDT by silverleaf (Fasten your seat belts- it's going to be a BUMPY ride.)
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To: silverleaf
Just wait a little longer and your wish will be granted.:-)
14 posted on 10/31/2008 7:53:19 AM PDT by TigerLikesRooster (kim jong-il, chia head, ppogri, In Grim Reaper we trust)
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To: TigerLikesRooster

Seriously,,when are mortgage rates going to reflect this. I look to refinance and they won’t budge below 6.5 and anything lower has 2.75 points or something ridiculous.

Seems the bankers are not giving an inch in terms of mortgages.


15 posted on 10/31/2008 7:55:31 AM PDT by cajungirl
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To: cajungirl
You won't lend money to others when your balance sheet is a big hole, but have no idea how big it is.
16 posted on 10/31/2008 7:59:55 AM PDT by TigerLikesRooster (kim jong-il, chia head, ppogri, In Grim Reaper we trust)
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To: TigerLikesRooster
Correction:

your balance sheet  is has a big hole

17 posted on 10/31/2008 8:09:21 AM PDT by TigerLikesRooster (kim jong-il, chia head, ppogri, In Grim Reaper we trust)
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To: TigerLikesRooster

But an excellent credit risk, 6 percent is good return. We bank with USAA and their mortgage is handled by GMAC so maybe GMAC is in trouble.


18 posted on 10/31/2008 8:15:48 AM PDT by cajungirl
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To: TigerLikesRooster; M. Espinola; Travis McGee; Calpernia; truthandlife; Freedom_Is_Not_Free; ...
Now the Fed and Treasury appear to lost their perspective. They no longer are thinking clearly. That is why they are paid the big bucks. To think things through with clarity.

To me it seems they only want to get through this financial crisis until January, 2009. They will walk away leaving this gigantic mess in the hands of a new administration.

Fed Interest Rate Cut May End Up Making Matters Worse !

Excerpt:

The Federal Open Market Committee’s half-point cut in its Federal Funds target does not address the leverage and credit issues in the banking system.

Indeed, by penalizing savers it worsens the economy’s supply/demand imbalance for funding. The cut doesn’t solve short-term problems and worsens long-term inflation worries.

The banking crisis was not caused by over-high interest rates. Its two main causes were large and unknown housing-related and other credit losses and an urgent need for banks to reduce their leverage.

Those problems are being addressed by huge Fed liquidity doses and plans to directly inject $250bn of new capital into banks via the Troubled Asset Relief Programme. Reducing already low interest rates will have no significant effect in alleviating the causes further. * * *

The news has been filled with reports about Wall Street using bailout money to obscene bonuses. One Example: AIG blew a fortune on lavish parties for the bosses. Reducing interest rates further almost guarantees banker will figure out clever ways to borrow more money -- to line their own pockets. Sticking it to the American taxpayer again and again.

I recall a line used in one of the 'Lethal Weapon' movies. Joe Pesci shouts 'First they **** you. And then they roll you over and they **** you again . . .' I urge everybody to read the report I linked to above. Then take three aspirins and pray for our country.

19 posted on 10/31/2008 8:43:01 AM PDT by ex-Texan (Ecclesiastes 5:10 - 20)
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To: TigerLikesRooster

Isn’t one tenent of the Muslim religion that lending of money should carry NO interest?


20 posted on 10/31/2008 11:22:00 AM PDT by ridesthemiles
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To: cajungirl

their mortgage is handled by GMAC so maybe GMAC is in trouble.”

GMAC is in trouble.
No cars being bought...
GM has been trying to sell GMAC for a number of months.


21 posted on 10/31/2008 11:23:45 AM PDT by ridesthemiles
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To: ridesthemiles

USAA subbed its mortgages to GMAC,,that may explain it. Actually the mortgage is handled by the GMAC Mortgage Service Center so I don’t know who holds it. Maybe USAA.


22 posted on 10/31/2008 11:49:00 AM PDT by cajungirl (no)
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To: TigerLikesRooster

Why not? It worked so well for Japan. (What do I use to show DRIPPING sarcasm? /sarc-postnasal?


23 posted on 10/31/2008 2:16:50 PM PDT by Freedom_Is_Not_Free
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To: ex-Texan
"If recession should threaten serious consequences for business (as is not indicated at present) there is little doubt that the Federal Reserve System would take steps to ease the money market, and so check the movement."

~~Harvard Economic Society, October 19, 1929

"Business will turn for the better this month or next, recovering vigorously in the third quarter and end the year substantially above normal."

~~Harvard Economic Society, May 17, 1930

24 posted on 10/31/2008 2:51:49 PM PDT by Travis McGee (--- www.EnemiesForeignAndDomestic.com ---)
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