Friday, August 31, 2007

Is a Fed rate cut a lock? Not so fast....

Many people I've talked to have thought that a rate cut by the Federal Reserve at their September 17 was more or less a sure thing.

Not so fast! Greg Ip of the Wall Street Journal, in this very good article, lays out how Ben Bernanke is definitely cutting his own path.

To sum up the article, there are very real fears that cutting the federal funds rate would encourage people to go back to the bad old days of lending money to borrowers who shouldn't have it. Or, in the words of one broker I talked with recently, "take the industry back to being a bunch of yahoos that can't talk about anything else but rate."

In other subprime meltdown news, HR Block says it's getting out of the mortgage business period, end of story, even if the sale of OptionOne to Cerebrus Capital Management doesn't go through.

Given that Cerebrus was a three-headed dog in charge of guarding hell, this kind of looks like a no-win for OptionOne employees.

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