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CNNMoney.com
Read the Fed statement
Tuesday January 22, 8:31 am ET


The Federal Open Market Committee decided today to lower its target for the federal funds rate 75 basis points to 3.5 percent.
The committee took this action in view of a weakening of the economic outlook and increasing downside risks to growth. While strains in short-term funding markets have eased somewhat, broader financial market conditions have continued to deteriorate and credit has tightened further for some businesses and households. Moreover, incoming information indicates a deepening of the housing contraction as well as some softening in labor markets.

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The committee expects inflation to moderate in coming quarters, but it will be necessary to continue to monitor inflation developments carefully.

Appreciable downside risks to growth remain. The committee will continue to assess the effects of financial and other developments on economic prospects and will act in a timely manner as needed to address those risks.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Charles L. Evans; Thomas M. Hoenig; Donald L. Kohn; Randall S. Kroszner; Eric S. Rosengren; and Kevin M. Warsh. Voting against was William Poole, who did not believe that current conditions justified policy action before the regularly scheduled meeting next week. Absent and not voting was Frederic S. Mishkin.

In a related action, the Board of Governors approved a 75-basis-point decrease in the discount rate to 4 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Chicago and Minneapolis.

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So, is this TO LITTLE TO LATE? Scary times. IF you have a adjustable rate mortgage, MIGHT BE a good time to starting thinking about locking in to a FIXED rate.
 

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Talking about it on the news right now.
 

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Jeff said he heard that they may lower it again during the regular meeting next week. I think that's the only thing that kept the market from dumping today. Last night most of the international markets lost between 3-10 percent.
 

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Prime Rate is not the same as Fed Funds rate.

It is usually 300 basis points (3%) higher. Before the cut the WSJ Prime Rate was 7.25%. It will probably adjust down to 6.5%.

Fed Funds is what banks charge each other to borrow. Prime Rate is what they lend money to for their most-favored customers (not many individuals). Most individual loans are Prime + (half, 1, etc.).
 

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The can cut the rate all they want, propose 90 day grace for mortgages etc, hard time are inevitable. They are coming.
 

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Whether anyone cares to believe it we are entering a recesion right now. The lowering of the discount rate will do little to reverse the economy. Recesion is a natural function of an economy to help cleanse bubbles. They come and go. The only question is how bad it will be now and whether we let the economy correct itself. Lowering the interest rates affects much more than loans to homeowners (who can't afford them anyways) or credit cards or vehicle loans. It affects our global position in getting financing as a country. The projected deficit for 2008 of $200+ billion will be financed by foreign countries - mainly China. When we lower our rates, these foreign entities may seek better returns elsewhere than investing in U.S. Government bonds. Already China is talking about shifting its investments from dollars to Euros. With a greater than 9 TRILLION dollar deficit and adding another $200 or more billion each year at some point we will run out of countries willing to fund us. Then the Chit REALLY hits the fan. Bush's puny $150 Billion tax refund proposal will also do little to stimulate the economy.

Hold on tight we are in for a hell of a ride.

Thanks Greenspan!:|err
 

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Today I stopped by Bank of America to see just what a 30 year refi loan looks like.

on a $250,000 refi, closing costs were $6,568.46 (not including points). If I opened a savings and checking account, they would discount it $2,495.

Interest rate was 5.75 over 30 years (w/.002 in points). (Which is my current rate).

So...tell me...how are lower rates going to save the mortgage crisis??? There is a long way to the bottom to come. We are not in a blip down market, where in 3-6 months, the market will turn around. If it does, 2009 will be even worse.

If you can't make your payment today, how in hell do they think refinancing is going to help. All I can see it a bunch of loans adding $6568.46 in refi costs to the total, and more bad loans.
 

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Correct me if I'm wrong, but the Fed rate effects different money than mortgage money I think.
Right?

Aren't mortages funded through some sort of bond system?

Damfino, but I thought their were seperate pools of money.
 

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Correct me if I'm wrong, but the Fed rate effects different money than mortgage money I think.
Right?

Aren't mortages funded through some sort of bond system?

Damfino, but I thought their were seperate pools of money.
30 year loans are based off the 10 year T-bill, but a federal rate change indirectly effect 10 year t-bill on the open market. The 10 year today closed at 3.60%, and I believe the the 30 year morgage runs about 2% higher.

I was actually looking to see if BoA was offering a Zero point/ Zero closing cost loan. I was suprised at how much a refi cost in closing costs
 

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This is not the bottom imo.
In the boom of all the arms that have been financed, the payments are set to go up on the most number of them in May and June of this year. So 90 days following that should be the bottom in my opinion. I believe Spring 2009 will start the slow increase.

I am banking on this because I am trying to build a new house and want to start construction on Sept 1, right when everything should be at the bottom. My plan is to sell my current house 90 days before the new one is done, so I am hoping for a sale in June 2009.

If I am wrong, I may lose a ton of money as I cant afford 2 house payments, but if I am right.... pay day because my equity will be great in a very short time. :)

They did this drop because the international markets took a dump on Monday where our market was closed for MLK. They were expecting a 5% loss in our market today and the rate cut only slowed it to a 3% to 3.5% decline or so.
 
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