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To: MythMan who wrote (11277)	11/17/1998 5:05:00 PM
From: yard_man	Read Replies (1) \| Respond to of 86076

Sure, I care. Wonder if isn't some kind of reverese psychology or something? Should take them a month or two to fail and then another couple of months for everyone to notice and another 3 - 4 months before the banks confess "minimal exposure" and 3 - 4 months before we learn the 1/2 of it after their stock prices have been cut to 1/4 of where they are now.

To: MythMan who wrote (11277)	11/17/1998 5:08:00 PM
From: yard_man	Read Replies (2) \| Respond to of 86076

And would this necessarily be a bad thing? >>If those spreads remain high, they could hinder the ability of companies to borrow and continue expanding. ''They (the Fed) were worried that the spreads were still wide and they are still concerned some people may not have the same access to credit down the road,'' said Paul Kasriel, chief U.S. economist at Northern Trust.<<< Have to cut back on some share repurchase programs, eh? _________________________________________________________________ Fed rate cut should bolster U.S. markets recovery By Marjorie Olster NEW YORK, Nov 17 (Reuters) - The Federal Reserve's third rate cut in less than two months should solidify a tentative recovery in U.S. financial markets and reduce the risk of a credit crunch, economists said on Tuesday. The policy-setting Federal Open Market Committee (FOMC) on Tuesday cut the federal funds rate to 4.75 percent from 5.0 percent. That followed back-to-back quarter-percent rate cuts on September 29 and October 15. The central bank also lowered the discount rate, the rate commercial banks are charged to borrow directly from the Fed, to 4.50 percent from 4.75 percent. ''Although conditions in financial markets have settled down materially since mid-October, unusual strains remain,'' the Fed said in a statement at the end of the FOMC meeting. Fed watchers said the statement sent a message that the Fed remains concerned about the danger of a credit crunch from abnormally bloated spreads between Treasuries and riskier corporate bonds or emerging markets debt. If those spreads remain high, they could hinder the ability of companies to borrow and continue expanding. ''They (the Fed) were worried that the spreads were still wide and they are still concerned some people may not have the same access to credit down the road,'' said Paul Kasriel, chief U.S. economist at Northern Trust. ''They thought if they did not cut today, some of the progress made in returning liquidity to the capital markets and taking out some of the risk aversion might be undone, not to mention the stock market may have fallen by 200 points.'' While bond spreads have fallen somewhat from their peaks in September, they remain historically high and, in some cases, double year-ago levels. Kasriel, a former official at the Federal Reserve Bank of Chicago, said the Fed may have felt certain pressure from the markets which were widely expecting a rate cut this week. ''It is cheap insurance,'' he said. Some said the Fed may have also wanted to avert a stock market sell-off which, in the near-term, could dampen consumer spending during the upcoming holiday season and, in the longer run, stunt demand and lower the savings rates even more. The Dow Jones Industrial Average was trading just below the 9000 level on Tuesday after rallying on Monday to its highest level since the end of July. "There is a lot of worry about wealth effects and potential negative wealth effects down the line. The Fed certainly can't be happy that the economy is depending on a personal savings rate that is zero or negative, said David Levy, director of forecasting at Jerome Levy Economics Institute at Bard College. Fed watchers said bond spreads are still unusually wide but volume has improved and lower quality borrowers are coming back into the market. ''They did it because financial markets strains have improved and they came to the conclusion I guess the improvement might be vulnerable if the Fed didn't move today,'' said Stuart Hoffman, chief economist at PNC Bank Corp. ''They wanted to make sure that improvement did not backslide...The strains have improved but not by enough.'' Elliott Platt, managing director of economic research at Donaldson, Lufkin and Jenrette Securities Corp, said there had been a modest revival of issuance in the junk bond and high-grade corporate bond market in recent weeks. ''...That's still minuscule issuance volume relative to what we've seen,'' he said. ''Net-net they're still concerned that this credit crunch at some point could shut the economy down. That's why they're easing.'' With inflation benign, analysts said the main risk to the U.S. economy now is much slower growth in 1999 due to weak exports, declining capital expenditure and business investment, and possibly lower consumer spending. Concern over the frailty of international markets and foreign economies and their impact on the U.S. economy was also seen as a major motive behind the Fed's move on Tuesday. Related News Categories: currency, international, options, US Market News Help Copyright © 1998 Reuters Limited. All rights reserved. Republication or redistribution of Reuters content is expressly prohibited without the prior written consent of Reuters. Reuters shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon. See our Important Disclaimers and Legal Information.