Tuesday, September 16, 2008

One Fed Meeting Down, One More To Go

The Fed left the fed funds rate unchanged at 2%.  I am surprised they didn't bow to the pressure from Wall Street firms hoping to get one more cut to help ease strains in the capital markets.  The equity markets initially sold off on the news, then rallied, then sold off, then rallied to finish up on the day.  I may have missed a rally or a sell-off in there.
With one Fed meeting down, the market can now turn its attention to the other meeting taking place, the one between AIG, the Treasury, the Fed, and any banks still remaining in business.  Apparently, the Fed is considering a conservatorship as an option for AIG.  In my previous post, I joked about Morgan Stanley scratching out Fannie and Freddie's name on a memo and replacing it with AIG's name as MS had been hired as an advisor to create a resolution to the AIG debacle.  Really, I was joking.  But it appears as if this might occur.  So we got rid of moral hazard for about two days.  It's a start, I suppose.     

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