No Fed housing rescue today

Fed headline: No change in interest rates, Fed remains most concerned about inflation, which means it remains more likely to raise rates than to cut rates. This disappoints those (Jim Cramer) who believe the housing/debt crisis is so severe the Fed needs to move off its "tightening bias," and start leaning toward cutting rates.

That said, the Fed today did pay more lip service to the housing and debt problems than it has in the past: From today's Fed statement: "Financial markets have been volatile in recent weeks, credit conditions have become tighter for some households and businesses, and the housing correction is ongoing."

From the previous Fed statement (June 28): "Economic growth appears to have been moderate during the first half of this year, despite the ongoing adjustment in the housing sector."

Important distinction: The Fed now says housing is in a "correction," not an "adjustment." Traders and investors generally use the word "correction" to describe a significant decline. The Fed knows this.

Market reaction: The Dow, at 2:36 pm EDT (21 minutes after the Fed's statement was released), was down 105 points. It had been up 35 points prior to the decision. The Fed is not coming to the rescue; investors are disappointed.

What else did the Fed say? You can click on the links and read the entire statements, but what we've quoted above is the entirety of what the Fed said about housing and credit.

Comments? Thoughts? Insights?
Photo Credit: Reuters

Comments

[victor]

It isn't possible for the fed to raise rates, we have to believe that Crammer has to have some sort of insight. With todays news of increase In rate for non Conforming loans doesn't help the already shrinking Buyers pool, We and every one needs a rate cut, lets tighten Documentation and crack down on fraudulent Brokers but let people who can continue to buy. I believe Crammer is our Canary.

[Mary G.]

No one should continue to buy until home prices drop significantly, and the Fed is doing the right thing by reinforcing discipline by keeping rates at the levels they are now (which are still low by historic comparison). Home prices have still dropped very little; asking prices are still high, and when buyers make an offer, their pretty much giving sellers what they wanted in the first place. Valuations for homes should never have so grossly exceeded the rate of inflation over the past years, and it only happened because of too-available money (bundled mortgage securities) combined with low interest rates. Now, corporate borrowing is also being severely impacted, which is Jim Cramer's real interest. Stock valuations won't be pushed up as much if there's less money available for both leveraged buyouts and margin borrowing. Let Cramer yell all he wants, but the pain that is being caused now will make for a better world for homebuyers, consumers, lenders, corporations, and everyone else, and will restore sanity.

[albert]

I have been *schooled* so many times during the past three years by so-called *house owners* (read :no money down, neg ammotrization, 2/28 loans and more) , about how smart they really were and how much money they were going to make without doing anything, just seeing they beloved houses appreciate. So I say , burn baby burn without slight envy, lets see market adjust , bringing home prices down.
I would like to see middle income Americans being able to afford 2000 sq feet house in the Valley without being 700k in debt.

[Problemwithcaring]

Waaaaaaay to early for a Fed bailout and Bernake knows it.

He just inherited this mess a few months ago - he doesn't even plan to assist housing releated markets until at least after the energy-violatile summer and perhaps far beyond.

[cdgreen1984@aol.com]

Can someone explain to me what would be the benefit of the feds lowering interest rates when people still cannot buy unless they are A-paper? I wouldn't think those people to be the ones who would need help buying in the first place. On the other hand, it seems the feds are also trying to make friends with a more left-wing part of the public: this decision seems fairly "blue" considering the elections are nearing. Maybe a spring board topic for the democrats in the near future? I get the feeling something mighty big is brewing in the distance.

[www.BetterVillage.com, XYZ, PDq.]

No fed rescue... but here comes ditech in their shining armour. Has anyone noticed their ads which are running in the blog recently? Continuing with their "People are smart" theme, they offer us the "sleep ez loan." Figure floats down through the puffy white clouds telling us about their loans and giving us their phone number *and* letting us know that we can get a mastercard from them as well that will help us pay down our loan balance. Are these people insane? They are looking us in the eye, telling us we're smart, and assuming we're stupid. Maybe we are? Maybe, even knowing this, people will keep the name "ditech" in their heads and call them when they need their loan (this will definitely work for the television audience on whom they're spending a fortune in advertising as well lately)