Question about rate cut

Hopefully someone can help me understand this...They annouced the 1/2 pt. rate cut this morning saying they were doing this to encourage people to apply for loans and borrow money...but on the other hand everyone is saying how we're in a credit crisis and its harder for the majority of people to get loans now...Am I missing something here? To me it sounds like they are encouraging people to apply for loans which they are going to get turned down for ..so who is it helping? Please help me understand this!

Re: Question about rate cut

the rate cut decreases the cost for banks to borrow from the fed.

so it makes it cheaper for the banks to borrow, which in turn makes it easier for them to lend $$. (less costly to borrow, and the savings is passed onto the customer)

well, thats how its supposed to work. it probably wont though

Re: Question about rate cut

Posted by Meaghan729

the rate cut decreases the cost for banks to borrow from the fed.

so it makes it cheaper for the banks to borrow, which in turn makes it easier for them to lend $$. (less costly to borrow, and the savings is passed onto the customer)

well, thats how its supposed to work. it probably wont though

Re: Question about rate cut

Posted by jklein1323

Posted by Meaghan729

the rate cut decreases the cost for banks to borrow from the fed.

so it makes it cheaper for the banks to borrow, which in turn makes it easier for them to lend $$. (less costly to borrow, and the savings is passed onto the customer)

well, thats how its supposed to work. it probably wont though

No I understand how it works...thats not what I"m asking..

Re: Question about rate cut

Re: Question about rate cut

Posted by libby2595

Posted by Meaghan729

they cut rates so banks would have more availability to capital and want to lend

and THEIR availability to lend is part of the reason they have been quick to turn people down. so, if it's easier for them to have access to capital, it's easier for them to OK a loan from the consumer.

like stated above, that's how it SHOULD work

Re: Question about rate cut

Posted by jklein1323

Posted by libby2595

Posted by Meaghan729

they cut rates so banks would have more availability to capital and want to lend

and THEIR availability to lend is part of the reason they have been quick to turn people down. so, if it's easier for them to have access to capital, it's easier for them to OK a loan from the consumer.

like stated above, that's how it SHOULD work

Ok so what then ..they are going to be more lienient (sp?) on giving out loans now b/c of this cut? Thats I guess what I"m missing..if they aren't going to be more lienient about giving loans the cut is sort of pointless. Am I making sense?

Re: Question about rate cut

Posted by Meaghan729

Posted by jklein1323

Posted by libby2595

Posted by Meaghan729

they cut rates so banks would have more availability to capital and want to lend

and THEIR availability to lend is part of the reason they have been quick to turn people down. so, if it's easier for them to have access to capital, it's easier for them to OK a loan from the consumer.

like stated above, that's how it SHOULD work

Ok so what then ..they are going to be more lienient (sp?) on giving out loans now b/c of this cut? Thats I guess what I"m missing..if they aren't going to be more lienient about giving loans the cut is sort of pointless. Am I making sense?

LOL you arent missing anything you are dead on. Thats how the rate cuts are supposed to work - but thats notgoing to happen - its more psycological than anything else. Inflation is less of a concern these days, which is why they are usually cautious of rate cuts.

Message edited 10/8/2008 10:02:28 AM.

Re: Question about rate cut

Posted by jklein1323
Ok Thanks..I thought I was missing something or just dumb..I'm sitting here like