The Fed today cut the discount rate to 5.75% sending the message that it to is worried about credit markets. The discount rate is the rate that commercial banks and other depository institutions are charged on loans from regional Federal Reserve offices. In general, banks try to limit their use of Federal Funds because it is generally more expensive than obtaining cash through customer deposits or other means.
Interestingly, I noticed on the BestCashCow website that several large mortgage lenders (Countrywide) have significantly increased the rate they are paying on CDs and savings accounts in an attempt to bring in depositor money. Notice that even these top rates are below the Fed Discount rate.
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Related Articles:
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Heads in the Sand -- Inflation sure ain't "moderate" by walt - Jun 29, 2007
Bernanke's Speech from Jackson Hole by LikeItIs - Aug 31, 2007
Falling Prices Driving Mortgage Crisis by PhilR - Dec 04, 2007
Up to 300 Banks Could go Under, According to Insolvency Experts by JRodgers - Aug 27, 2008
Neutron Loans by Sam Cass - Aug 18, 2007
The Fed Cuts Rates by Half a Percent (50 Basis Points) by BestCash Admin - Sep 18, 2007.


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