At about 8:15 ET Friday morning, the Federal Reserve reduced the discount window rate, which was 6.25% (a 1% penalty over the stated 5.25% Fed Funds rate) to 5.75% (a .5% penalty) for borrowing at the discount window. The most heartening thing about it is the reversal in worrying much more about the economy:
Financial market conditions have deteriorated, and tighter credit conditions and increased uncertainty have the potential to restrain economic growth going forward. In these circumstances, although recent data suggest that the economy has continued to expand at a moderate pace, the Federal Open Market Committee judges that the downside risks to growth have increased appreciably. The Committee is monitoring the situation and is prepared to act as needed to mitigate the adverse effects on the economy arising from the disruptions in financial markets.
Oddly, Bill Poole, who was saying just a couple days ago that there was no reason for a cut, is not listed as voting either for or against today's Fed move. It was just reported on CNBC that he had a scheduling conflict.
I wonder what it's like to blog at the Volokh Conspiracy and find all your posts shoved down to the bottom by a series like this one.
What a joke. I guess the "Calamity" happened a bit quicker than expected? All just a confidence game. Any "rally" by the banks or lenders is to be looked at with scorn. Really they fed should be sued by anyone who is short. Who are they to say what the cost of money should be? Sucks to be a foreign holder of the dollar. Better depeg too before its too late! This manipulation will PROLONG the problems.
Are there really pro-fed libertarians? I would love to hear that justification.
There was speculation on CNBC that Bernanke announced this just before the market open to punish the short index option traders, whose positions expired at the OPENING price. One commentator suggested that something similar was done in 1998 by Greenspan to punish the shorts.
Are you sure?
Poole is listed as an "alternate member" in the minutes of 2006 meetings and as a member of the FOMC in the minutes of all 2007 meetings. Thus, it appears that Poole is a 2007 member (and the Dallas fed chief was subbing for him in the latest decision).
Also, it may be just a coincidence, but every other Federal Reserve but St. Louis lowered its discount rate immediately, while the St. Louis Fed's lowering of the rate takes effect on Monday.
SEE: <link>
Jim Lindgren
guess it is interesting he either abstained or did not participate. this action is not inconsistent with what he was saying the other day about no rate cut prior to next meeting, but then again for him to vote for this more symbolic than substantial action would probably have been even more confusing to market, potentially inducing more panic and having the opposite of the desired effect.
The SEC should investigate ... I guess if they knew that was their job, they'd investigate.
control committee ??