Industry leaders call Fed rate cut 'stunning'
Minneapolis / St. Paul Business Journal - by Bryant Ruiz Switzky Staff Writer
A panel of local business leaders had mixed reactions to the .75 percent rate cut from the Federal Reserve Tuesday at the annual Business Journal industry outlook event in Minneapolis.
The rate cut was the largest to the federal funds rate since 1990. After the news, U.S. Bancorp (NYSE: USB, TCF Financial Corp. (NYSE: TCB) and Wells Fargo & Co. (NYSE: WFC) were among the banks lowering their own prime lending rates.
"I spent six years on the Federal Reserve board in San Francisco, and I gotta tell you, three quarters of a point cut is a stunning change," said Rick Hartnack, vice chairman of head of consumer banking at U.S. Bancorp. "What it will do is really make mortgages a lot more affordable - and that is absolutely critical to fixing the imbalance of supply and demand for housing right now."
But Hartnack warned that "if it sounds too good to be true, it probably is. Government stimulation is always too much too late, and usually leads to inflation," he told the crowd at the Hiltion.
"It's a stunning move," agreed John Johnson, president and CEO of CHS, Inc., an energy, grains and food cooperative. He said he thought making it cheaper to borrow money would help business, but that it was really about regaining confidence.
"I think a lot of this - whether it's stimulus by the government or the Fed lowering its rates, it's trying to build confidence back ... to consumers so they can buy homes and have cheaper access to money."
But he was wary of consumers getting too confident and buying things they couldn't afford.
Dick Kelly, chairman, president and CEO of Xcel Energy Inc., said the rate cut "will help companies like us that have large capital needs." |
