None Dare Blame The Fed

The Federal Reserve Board is meeting today to determine how much heroin to inject into the veins of the struggling financial sectors of the United States. The expectation is that The Fed will slash interest rates by as much as one percent, creating an easier environment for bankers to do business.

Of course, the Fed is no longer in the business of simply helping out member banks. Last Friday, in a surprise move, the Fed moved to bail out the investment firm, Bear Stearns, after the firm lost nearly half of its market value in a matter of minutes. Bear Stearns is one of the firms that was hardest hit by the subprime mortgage crisis.

Who loses when the Fed acts in such a manner? You do, especially if you maintain a responsible, frugal-t0-modest lifestyle that actually involves planning for your future. If you have been able to adjust your spending habits in order to survive the present recession, get ready to adjust some more...because if the Fed continues to take such irresponsible actions as they did last Friday, you are going to have to make a lot more sacrifices.

From the knock-me-over-with-a-feather department, CNNmoney.com today posted an article that (gasp!) called for more government (and Federal Reserve) intervention in order to stave off the unfolding nationwide crisis. The quote:

"[former Fed Governor] Lyle Gramley and some other experts believe the solution to the current credit crisis will have to come from Congress, not the Fed, and that the federal government will have to take steps to bail out both Wall Street firms holding mortgage-backed securities as well as homeowners who have mortgages with balances greater than the value of their homes."

I wonder who is less intelligent: former governor Gramley or the author of this article. Unless some form of non-financial bailout has been invented, I wonder how government will solve this crisis. The fact that the author (and his editor) saw fit to print this in spite of this oversight speaks volumes of their collective ignorance.

One thing is for sure, regardless of what actions are taken by the Fed today (and in the future), the bailing out of Wall Street firms as well as "upside down" mortgage holders will only intensify the impact felt by all consumers. It is well past the time where responsible people are punished for making the right choices and forced to subsidize those who have made poor decisions.