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Slowtwitch Forums: Lavender Room:
INTEREST RATE ENLIGHTMENT

 
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frenchfried

Oct 7, 08 0:18

Post #1 of 5 (169 views)
INTEREST RATE ENLIGHTMENT Can't Post
I really don't understand this. I have money in US bank- treasury somethings. It was getting 4.5%, now 2%. I get this part but from everything that I have read the commercial rate is 5%. So they are still making 3% on loans? and this is bad for them? Why don't they lower iit and help stop the credit crunch?


fitzie

Oct 7, 08 5:47

Post #2 of 5 (141 views)
Re: INTEREST RATE ENLIGHTMENT [frenchfried] [In reply to] Can't Post
The Federal Funds Rate is at 2%. A year ago it was 4.75%. They have cut it a lot. The problem has to do with the Libor rate which is at about 4%. Since I am not a finance geek, I won't even try to get technical, but basically the banks are paying an extra premium of 2% to borrow money from each other. The banks then pass this onto people wanting credit and mortgages. That is one of the many reasons credit is so hard to come by right now.



"We thought that we had the answers, it was the questions we had wrong."
Bono

(This post was edited by fitzie on Oct 7, 08 6:14)


frenchfried

Oct 7, 08 6:23

Post #3 of 5 (128 views)
Re: INTEREST RATE ENLIGHTMENT [fitzie] [In reply to] Can't Post
Thanks but it still seems like there is 3% floating around.


David in FL

Oct 7, 08 7:54

Post #4 of 5 (108 views)
Re: INTEREST RATE ENLIGHTMENT [frenchfried] [In reply to] Can't Post
That 3% is called gross margin......and 3% isn't much. Out of it the bank has to pay all of it's expenses and somehow provide some kind of shareholder return. There's not a lot left over.

BTW........I may be a little confused, but what "credit crunch" are you referring to?


"Far better it is to dare mighty things, to win glorious triumphs, even though checkered by failure than to rank with those poor spirits who neither enjoy much nor suffer much, because they live in a grey twilight that knows not victory nor defeat."

Theodore Roosevelt


Mito Chondria

Oct 8, 08 16:39

Post #5 of 5 (67 views)
Re: INTEREST RATE ENLIGHTMENT [David in FL] [In reply to] Can't Post
Fractional Reserve Lending?


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