The Fed lowered their lending rate to between 0 and .25% yesterday in an attempt to combat the Bush recession: In theory, the Fed's action should r
December 17, 2008

monopoly-man_7fdb9.jpg

The Fed lowered their lending rate to between 0 and .25% yesterday in an attempt to combat the Bush recession:

In theory, the Fed's action should reduce the cost of borrowing for consumers and businesses, since the prime rate — what banks charge their best customers — moves in tandem with the federal funds rate.

The prime rate typically influences rates for car loans, student loans, credit cards and other debt. With Tuesday's cut, the prime rate is expected to fall to 3.0 to 3.25 percent from 4 percent.

However, despite the attractive rates, banks aren't lending to most consumers and businesses. Weak financial institutions continue to hoard cash and build their balance sheets, with little appetite for risk in new loans. That's worsening the economic downturn, especially since it hurts consumers, who drive almost two-thirds of U.S. economic activity.

In a statement, the rate-setting Federal Open Market Committee said that "The outlook for economic activity has weakened further . . . the Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability."

Credit card companies, of course, will continue to charge as much as they're legally permitted, driving consumers into a ditch and accelerating mortgage foreclosures.

Isn't untrammeled capitalism fun?

Can you help us out?

For 17 years we have been exposing Washington lies and untangling media deceit, but now Facebook is drowning us in an ocean of right wing lies. Please give a one-time or recurring donation, or buy a year's subscription for an ad-free experience. Thank you.

Discussion

We are currently migrating to Disqus

On May 14, 2022, we started migrating our comments from Insticator back to Disqus. During this transition period, some posts will have Insticator and some Disqus. For more information on the transition, as well as information regarding old C&L accounts, please see this post.


We welcome relevant, respectful comments. Any comments that are sexist or in any other way deemed hateful by our staff will be deleted and constitute grounds for a ban from posting on the site. Please refer to our Terms of Service for information on our posting policy.