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Strategies & Market Trends : Strictly: Drilling II -- Ignore unavailable to you. Want to Upgrade?

To: t4texas who wrote (16360)	7/23/2002 5:59:46 PM
From: Paul Shread	Read Replies (1) \| Respond to of 36161

Very good point. Most people probably don't even know what the Fed's primary charge is: the stability of the banking system. However, the market wasn't too soothed by the LTCM bailout in '98.

To: t4texas who wrote (16360)	7/24/2002 1:20:40 AM
From: t4texas	Read Replies (1) \| Respond to of 36161

how is this point so conveniently being missed by economists? in a steady-state, equilibrium economic situation (normal is what i mean to say) it is ok to substitute big consumer loans for some big business loans, but it quite something different when lots of businesses can't borrow enough money anymore (banks, bonds, anything) and consumers are making up the difference for the total loans. it seems to be conveniently (or stupidly) forgotten that if all these american companies that are having lots of debt trouble are not somehow going to get to borrow some short term or long term money, lots more large and small companies are going to go out of business (and their ceo's and cfo's may not even be crooks). consumer family paychecks will stop, and those mortgage loans and visa bills won't get paid. getting a job at walmart or the tire store won't get that mortgage payment they have to make. so the banking crisis i see is the lack of loans to small, medium, and large companies. mcculley talked about this in his last pimco brief. the low cost money is there, but the banks are not making the loans anymore. so when i came across this paul kasriel article, i see he is writing about loans to consumers making up loans that would go to businesses. not a good use of all that cheap money. if businesses can't get the money, then consumers will soon not get the money either. so the fed has a puzzle to solve, i.e., how to get the banks to make loans again. let's see what happens. i think it is laughable to think that lowering interest rates again will produce any business loans. so the fed will need to put its thinking cap on or this will get out of hand in a hurry. northerntrust.com