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.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.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. * * *
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.
~~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