BoatBanter.com - 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.