Skip to main content

Home/ wlmac economics/ Group items tagged discount

Rss Feed Group items tagged

Filter: All | Bookmarks | Topics Simple Middle
Stephen Lu

Fed Lowers Discount Rate - What Does It Mean? - 0 views

useconomy.about.com/...000146.htm

financial crisis economics lowers discount rate fed

shared by Stephen Lu on 13 Jan 11 - No Cached
  • On Friday, August 17, the Federal Reserve lowered its discount rate from 6.25% to 5.75%. This not to be confused with the Fed Funds Rate, although many Fed-watchers think this means the FOMC will lower that rate at its next meeting on September 18.
  • The Fed lowered the rate to restore confidence in the financial markets, battered by the ongoing 2007 banking liquidity crisis. The discount rate is the what the Fed charges banks at its discount window. By lowering the rate, the Fed makes it easier for banks to borrow funds needed to maintain their reserve requirement. Normally, banks would borrow from each other, rather than go to the Fed's discount window.
  • Stephen Lu on 13 Jan 11
     
    Why the FED lowered interest rates
Apiraami Pathmalingam

The 2007-08 Financial Crisis In Review - 0 views

www.investopedia.com/...financial-crisis-review.asp

FED crisis

shared by Apiraami Pathmalingam on 12 Jan 11 - No Cached
  • Central banks in England, China, Canada, Sweden, Switzerland and the European Central Bank (ECB) also resorted to rate cuts to aid the world economy
  • led to a 40% decline in the U.S. Home Construction Index
  • by 2004, U.S. homeownership had peaked at 70%; no one was interested in buying or eating more candy
  • ...17 more annotations...
  • To keep recession away, the Federal Reserve lowered the Federal funds rate 11 times - from 6.5% in May 2000 to 1.75% in December 2001 - creating a flood of liquidity in the economy.
  • prey in restless bankers - and even more restless borrowers who had no income, no job and no assets.
  • environment of easy credit and the upward spiral of home prices made investments in higher yielding subprime mortgages look like a new rush for gold.
  • Fed continued slashing interest rates, emboldened, perhaps, by continued low inflation despite lower interest rates
  • Fed lowered interest rates to 1%, the lowest rate in 45 years.
  • everything was selling at a huge discount and without any down payment.
  • the entire subprime mortgage market seemed to encourage those with a sweet tooth for have-it-now investments.
  • trouble started when the interest rates started rising and home ownership reached a saturation point
  • Federal funds rate had reached 5.25%
  • home prices started to fall
  • many subprime borrowers now could not withstand the higher interest rates and they started defaulting on their loans
  • financial firms and hedge funds owned more than $1 trillion in securities backed by these now-failing subprime mortgages - enough to start a global financial tsunami if more subprime borrowers started defaulting
  • could not solve the subprime crisis on its own and the problems spread beyond the United State's borders
  • interbank market froze completely
  • central banks and governments around the world had started coming together to prevent further financial catastrophe
  • Fed started slashing the discount rate as well as the funds rate
  • Federal funds rate and the discount rate were reduced to 1% and 1.75%
  • Apiraami Pathmalingam on 12 Jan 11
     
    This article indicates the many events which have happened during 2007-2008. This articles include the homeowners reactions and much more.
Stephen Lu

The Federal Reserve Bank Discount Window & Payment System Risk Website - 0 views

www.frbdiscountwindow.org/historicalrates.cfm

federal bank financial crisis discount rate

shared by Stephen Lu on 11 Jan 11 - No Cached
  • Stephen Lu on 11 Jan 11
     
    This shows the federal interest rate at several different years.
Stephen Lu

FRB: Federal Reserve Statistical Release H.15 - Historical Data - 1 views

www.federalreserve.gov/...data.htm

federal bank rates funds discount data raw

shared by Stephen Lu on 12 Jan 11 - Cached
  • Stephen Lu on 12 Jan 11
     
    All raw data about numbers of the FED
  • Stephen Lu on 12 Jan 11
     
    All raw data about numbers of the FED
Han Kyul Lee

Economics focus: A helping hand to homeowners | The Economist - 1 views

www.economist.com/...12470547

shared by Han Kyul Lee on 12 Jan 11 - No Cached
  • A lender may recover as little as half the value of the mortgage from a foreclosure, after legal and other costs, because abandoned homes quickly fall into disrepair and can only be sold at a discount.
    • Han Kyul Lee
      Han Kyul Lee on 12 Jan 11
       
      A lender of a mortgage is actually taking quite a risk, because abandoned property cannot be sold at full price as they quickly fall into disrepair. Thus, they may only recover as little as half the value of the mortgage from a foreclosure.
  • And foreclosures intensify house-price falls by adding to the stock of unsold houses. An enlightened bank may be better off forgiving a part of a mortgage if that persuades borrowers to remain in their homes.
    • Han Kyul Lee
      Han Kyul Lee on 12 Jan 11
       
      Foreclosures speed the drop of the housing price because the the home is added to the stock of unsold houses. Banks may do better by cutting down a part of the mortgage rather than have the borrowers default.
  • The bait for homeowners would be lower interest costs. Mr Feldstein thinks the scheme’s loans would need to have a fixed interest rate of around 2% to make a material dent in debt-service costs. In return borrowers would take on a slice of debt that they cannot welsh on: the replacement loan would not be secured on the home, but the government would have first claim on the borrower’s future earnings in the event of a default.
  • ...1 more annotation...
  • Given the extent of negative equity and the risk of a negative spiral of defaults and falling prices, efforts to keep homeowners in their homes may yet be necessary to solve the crisis.
    • Han Kyul Lee
      Han Kyul Lee on 12 Jan 11
       
      Because of the negative spiral of defaults and falling housing prices, homeowners kept in their homes may have been a solution to the financial crisis.
1 - 5 of 5
Showing 20▼ items per page