Tuesday, September 16, 2008

I Was Wrong - Fed Does NOT Cut Rates

The FED just announced they were not going to cut rates today which is a surprise given what I was hearing in the marketplace. This does not mean they cannot do it tomorrow, or the next day, or.... or. The positive side of this is that perhaps they believe the markets can handle this decision and they have some good news in thier pocket. A cut would have said "things are really bad and we are going to add liquidity", not cutting does not say the opposite, it just does not send that incremental message. We will see how this is taken by the markets. All eyes still focus on AIG as they really are, too big to fail.

3 comments:

Kathy LeMay said...

J,

Inquiring minds want to know: why did the federal reserve bail out AIG and not Lehman?

K

Frank said...

It was perceived that the ripple effect of AIG going under would be more widespread and closer to "Main Street" than Lehman. Also, because the Government was technically buying AIG, there was more more comfort in the assets backing AIG than those at Lehman.

Jacki Zehner said...

Frank is right again. I have such smart friends.