Quote:
Originally Posted by jyl
The Fed is not lowering rates to help upside-down subprime ARM borrowers stay in their houses. Those people are toast, fixed mortgage rates could go down 2 points and it wouldn't help them, housing prices could stop falling and stay flat and it wouldn't help them. That is simple math and the Fed knows it.
The Fed is lowering rates in an attempt to prevent the broader credit markets from freezing up, to soften the collapse of the broader housing market, and to stave off a significant recession in the US economy.
If the Fed raised rates, there is no convincing reason to bet it would raise the USD versus the EUR or other currencies. Currency exchange rates are extremely complicated and countries' relative interest rates are only one factor. Recall that the Fed was raising rates steadily during the last few years of Greenspan, yet the USD was declining.
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Well said, I would go further by stating it has nothing to do with housing, and everything with maintaining a liquid credit market. Bernanke is a student of the great depression and 1929 crash, he will do everything in his power to avoid that situation.
Here is a very good explanation of the rate cut:
http://suddendebt.blogspot.com/2007/09/real-reason-for-feds-50-bp-cut.html