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Lower Rates and Tax Rebates

Back in the Fall, some market observers argued against the Fed lowering interest rates and bailing out the bad behavior of speculators and investors who overleveraged with cheap debt and bid up prices on various assets, including commercial real estate, to unsustainable levels. Well, it turned out bad...

By Jonathan D. Miller | Updated on January 24, 2008

Back in the Fall, some market observers argued against the Fed lowering interest rates and bailing out the bad behavior of speculators and investors who overleveraged with cheap debt and bid up prices on various assets, including commercial real estate, to unsustainable levels. Well, it turned out bad behavior was so rampant and destructive spurred by licentious lending by the major financial institutions, the Fed couldn’t help itself and has lowered rates beyond what might have been expected just a few months ago.

While lowering the Fed funds rate may buoy Wall Street in the short term and shore up battered banks, will it help average Joe on Main Street and end the dire consequences of the housing skid? And will Washington’s $600 tax rebate keep consumers spending? A few hundred bucks doesn’t take you very far these days especially when a lot of folks have mounting bills. That rebate won’t suddenly improve most people’s credit ratings or give them enough equity to start house hunting when banks will insist on more money down.

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