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Pastimes : Home on the range where the buffalo roam -- Ignore unavailable to you. Want to Upgrade?

To: Boplicity who wrote (11760)	3/21/2001 12:59:09 PM
From: Jim Willie CB	Read Replies (4) \| Respond to of 13572

interest rates smorgasbord: Fed Funds rates dictate the rate of interest in overnight interbank loans among regional banks piggybacking that FedFunds rate is the Prime Rate I regard the FedFunds rate to serve as the basis for shorterm rates how it compares to the free-floating 3-month Treasury Bill yield is important the 3mo TB is the closest instrument in the free market to the overnight Fed-controlled rate so when talking about economic effect of the Fed's misguided policy, look to the Prime Rate credit cards (MC, VISA, Discover, Diners, AmEx) are linked to the Prime these are revolving credit e.g. prime plus 12% car loans are linked to the Prime these are 3-4-5 year loans e.g. prime plus 4% or 5% if you have ever bought a house, waited for yours to sell, you needed a bridge loan these are typically 6-18 months they operate like equity lines of credit equity line of credit is often called a 2nd mortgage (against home equity) these are often 10-yr loans but can also be revolving loans they are linked to the Prime e.g. prime plus 3% commercial loans are taken by small, medium, and large corporations they typically are called "commercial paper" and involve various loan schedules e.g. 3-yr renewable, 5-yr renewable, fixed 3-5-10 yr they are linked to the Prime, usually prime plus a varying amount e.g. prime plus 2% for best customers with a good credit history e.g. prime plus 4% for newer less experienced customers however... home mortgages are a different animal altogether they are offered at 15-yr, 25-yr, 30-yr payment schedules despite what bankers tell you, these are linked to 10-yr Treasury Notes the actual instruments are called "mortgage backed securities" almost every banker I have talked to says they are linked to the 30-yr TBond wrong, and I love to test them, but almost never correct them of their error so home mortgages are not influenced by the Fed and its ill-advised policies so the housing market has been spared of carnage, FOR NOW housing prices are far more vulnerable to unemployment nowadays because the Fed has been screwing up policy since 1997 the Fed does not directly infuence mortgages, but via employment, affects housing prices next asset class to get mutilated: real estate, starting at the top (over $500k) I would be glad to answer any specifics as best I can but I am not an expert / jim