While I was having dinner with my father last night, the Federal Reserve lowered the interest rate at which it loans money to central banks. While my family and I were discussing the economy (among a number of other more interesting topics), Ben Bernanke was actually doing something. Will the move help? It will be good for JP Morgan Chase, who will likely use the Fed’s funds borrowed at this rate to buy its collapsed rival, Bear Stearns.
Do these bail-outs send the right message? To me, in the interest of saving our faltering economy, the message to banks seems to be, “Feel free to lend to risky customers. If the worst happens, we’ll bail you out.” The message to consumers seems to be, “Buy more on credit than you can afford as long as everyone else is doing so.”
Sunday surprise: Fed steps into credit crisis [CNN Money]