The Fed Rides to the Rescue
The financial markets had a tough day Monday. Stocks dropped around the world while the U.S. markets had the day off thanks to Martin Luther King.
This morning, Bank of America - remember they're going to save Countrywide - and Wachovia reported falling earnings.
Today doesn't look any better. To try to head off a sell off in the United States, the Federal Reserve announced it was cutting the federal funds rate, the interest that banks charge each other on overnight loans, to 3.5 percent, down by three-fourths of a percentage point from 4.25 percent. This is considered huge.
For the best explanation, check out the NPR story and listen to Adam Davidson's interview on the move.
At first glance, it's not having much of a calming affect. The Dow and NASDAQ are down. Yahoo! Finance has stats on the markets in the United States and around the world if you want to stay on top of the turmoil.
If you work in the financial markets, it's obvious what this means to you. But those of you in the corner markets, it seems a little removed from your world. How do you think this is going affect your bottom line?
The upside to all this is the hope that the Fed rate cut will put enough money into the economy that we all get a boost. This could have a better outcome than any stimulus package that President Bush or his potential successors propose.
All we can do is wait and see.
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