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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Casaubon who wrote (35736)	12/22/1999 11:44:00 AM
From: jttmab	Read Replies (1) \| Respond to of 99985

Casaubon, Do not the banks borrow the money from the Fed, to lend. Fundamentally, I don't think this is a true statement. It's my understanding that the Fed only loans money to institutions in distressed situations, i.e., when an institution is risk of collapse and no other sources of lending are available to that institution. The amount of funds that an institution can lend is dependent upon their assets. In many cases, I think it would be difficult to make any correlation between average credit card interest rate and fed discount rate [exception being floating rates tied to, for example, the prime]. Also, if you look at the range of interest rates charged, roughly 10-20%, I think it is very difficult to argue that the discount rate has much [if any] impact at all. But as a hypothetical. Suppose the fed didn't set interest rates between it's member banks. What would you expect to happen? [Serious question, and I have no idea what the correct answer would be.] jttmab