The rate cuts being made by the Fed are not being passed along to homeowners, consumers, and most businesses. "Companies are paying more to borrow now than before the Fed reduced its benchmark rate by 1.25 percentage point over nine days in January, based on data compiled by Merrill Lynch" according to Bloomberg.
The argument that lenders would give for not lowering rates is that it is more risky to pass out money at almost any interest rate when the economy and credit markets are in trouble. This may be a fair point of view, but it does little to help the economy.
Mr. Paulson over at Treasury prides himself on brokering big deals to help the economy and financial markets. He has no control over the Fed. He does however have a great deal of leverage with the large money center banks.
The Fed may have to lower again, but that does not guarantee more liquidity at lower rates in the wider economy. Bernanke and Paulson are going to have to mount bully pulpits on opposite sides of Hyde Park and talk the lending rates at the consumer and small business level down.
Otherwise, no one but the banks benefits from another cut by the Fed
Douglas A. McIntyre
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