Fed of Fools

http://online.wsj.com/article/SB119746804568523549.html?mod=hpp_us_whats_news

I've been wondering with the new Fed Chairman if we would see a more aggressive approach to managing the economy. While his first move of 50 basis points surprised me, we are stuck with the same slow arduous, too little too late approach to the economy. Nothing changed with the Fed. The Fed ignored market sentiment this week causing a major market downturn. Ensuring, they will be wiping out massive amounts of wealth and driving us further into the recession pit in 2008. Their grossly stupid thinking that making more money available for BANK loans and increasing dollars on the street will fix the economy. So far no one is biting much. Offering more money to banks isnt going to spur the 3rd party economic drivers that lend to a larger part of the economy than stiff wallet banks do. Its silly. The economy is the problem and where its heading. You have homeowners trapped upside in their homes with no end in sight. No one is lending to them and the risks in todays market.

There is only one way to get the economy back on track - lower the fed and discount rates. The reason the markets continue downward is they are realizing the fed doesn't get it and wont. Layoffs are coming in 2008 after the holiday season.

The good news long term for the mortgage business is it will drive the rates even lower to generate this economy. Even with mortgage rates at 5.5% its not moving the markets. Lending is still down because you cant lend to upside down people. This market has got to go up bigtime. Until mortgage rates are 3 or 4 percentile,your not going to see a recovery in the mortgage market. Which is good news for those of us in the business if we can hold on till then.

Countrywide today announced lending dived 40%. It is going to be a tough road to keep them out of bankruptcy in the next few years. Those of us that can stick it through will come out on the other side of a great refi boom and lowered competition, with what will probably have to be a 0% discount rate like Japan had for over a decade.