Fed to lower interest rates again
On Mon, 8 Dec 2008 05:08:00 -0500, "Eisboch" wrote:
Heard on the news that the Fed is expected to cut interest rates again in an
attempt to get money flowing and home mortgages written.
A return to Greenspan economics.
Bernacke style.
This doesn't make sense. Although it certainly would benefit buyers, why
would a bank be motivated to start issuing 30 year mortgages at record low
interest rates in the middle of a severe recession?
I don't know this for a fact, but one of our friends who is a broker
told us the only agency writing mortgages now is the FHA.
What's that tell you?
A while back, when you were kind enough to help me out with that
handbook deal, my friend who has a high end, esoteric material machine
shop could book a 45 day deal with one of the local banks to finance
materials purchases - some of the materials he bought, alloys and the
like, were very expensive and a 45 day deal was perfect - .5% over 45
day LIBOR rate. Today, he can't find money anywhere. He's managed ok
by working supply financing deals with his long time suppliers who
want to maintain a solid business relationship, but the banks - forget
it. And this one particular bank he dealt with all the time just will
not lend him any money.
I don't get it either.
Wouldn't they rather ride out the storm and start writing mortgages when the
rates get higher again?
I think what they are hoping is that mortgages get written against the
potential of collateralizing them 5/10 years down the road. Also the
handling fees will go up.
I don't understand economics.
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