SavvySugar

The End of Wall Street as We Knew It

SavvySugar — Mon, 22 Sep 2008 15:30:54 -0700

While most of us were logging in couch time and watching the Emmys on Sunday night, the Federal Reserve was hard at work creating a new measure that converted investment banks Morgan Stanley and Goldman Sachs into traditional bank holding companies. The two firms were the last standing independent investment banks on Wall Street, and the conversion to bank holding companies truly marks the end of an era.

As bank holding companies, the two companies will be regulated by the Fed and held to much stricter capital requirements than in their previous independent lives. In order to preserve and increase liquidity, the banks will now rely on deposits for capital instead of short-term funding, and the reclassification will allow the banks to build up banking activities on top of the existing investment focus.

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Do You Read Credit Card Disclosure Forms?

SavvySugar — Mon, 05 May 2008 15:26:29 -0700

Aside from spending its time making important decisions about our economy, the Federal Reserve stood up to credit card companies on Friday by proposing a set of rules that would be helpful to credit card-using consumers. If approved, the new rules would affect the following changes.

Specify when card issuers can increase interest rates on existing balances.
Ban finance charges on balances that have been repaid.
Prohibit late fees on customers who were not given a reasonable amount of time to pay.
Companies wouldn't be allowed to direct payments to pay down the portion of the bill that had lower interest charges.
Give consumers the right to opt out of overdraft protection on their deposit accounts.

Ben Bernanke, the Federal Reserve's Chairman, said their previous efforts to require companies to improve their disclosure forms wasn't enough. He explained, "Based on our review of consumers' response to the Board's recent regulatory initiative, it seems clear that improved disclosures alone cannot solve all of the problems consumers face in trying to manage their credit card accounts."

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Interest Rate Cut Not the Best News For Your Savings Account

SavvySugar — Thu, 01 May 2008 04:27:04 -0700

Yesterday the Federal Reserve announced its seventh interest rate cut since September, lowering the federal funds rate by a quarter-point to 2 percent. Interest rates are now at their lowest since 2004 and reflect the Fed's ongoing concern about a weakening economy. The prime lending rate that affects consumers and businesses dropped correspondingly, which could have a positive effect on some credit cards and loans. Also, homeowners with adjustable-rate mortgages should have benefited from the seven rate cuts as rates would have been reduced as the Fed has made their moves.

The rate reductions are bad news for savers, because the interest rates available on savings accounts are lower than they used to be. The average rates barely keep up with the country's 4 percent inflation, which essentially means you're losing money by saving. But don't take that too literally and abandon your savings efforts - shop around for the best interest rates, and keep in mind that earning any interest is better than earning no interest.

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News Flash: Fed Cuts Interest Rate Again

SavvySugar — Tue, 18 Mar 2008 12:35:37 -0700

The Federal Reserve cut its federal funds rate this afternoon to 2.25 percent, making its sixth cut in the last six months. A weakening labor market, slowdown in consumer spending, a loss of confidence and crisis in financial markets, and a tight credit market were reasons the Fed used to support this most recent cut. Acknowledging the issues of inflationary pressures alongside a slowing economy, they stated "Uncertainty about the inflation outlook has increased. It will be necessary to continue to monitor inflation developments carefully.”

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News Flash: Fed Makes Emergency Interest Rate Cut

SavvySugar — Mon, 17 Mar 2008 13:03:40 -0700

In an attempt to avoid a financial market meltdown in the US, the Federal Reserve made an emergency rate cut on Sunday. The quarter percentage point cut applies to the discount lending rate to financial institutions, bringing the short-term lending rate from 3.5 percent to 3.25 percent. This cut only covers short-term loans that banks receive from the Federal Reserve and doesn't include loans to individual borrowers. This move called upon a Depression-era clause in the Federal Reserve Act that waives the ban on the Fed extending loans to nonbanks, as the rate cuts are extended to securities dealers, too. Federal Reserve Chairman Ben Bernanke said, "These steps will provide financial institutions with greater assurance of access to funds."

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News Flash: On a Euro High

SavvySugar — Thu, 28 Feb 2008 06:11:21 -0800

Yesterday, the euro's value hit its highest point against the dollar since it was introduced in 1999. The currency is valued at $1.5057 and analysts say it could move even higher than its current record. The euro's escalation is attributed to negative economic reports from the U.S. including the lowest consumer confidence levels since 2003 and higher wholesale inflation. There's speculation that the Fed may cut interest rates lower even after its big cuts in January - the cuts are intended to fuel the economy but could also have the unwanted effect of pushing the dollar's value lower.

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News Flash: Fed Cuts Interest Rate Again

SavvySugar — Wed, 30 Jan 2008 12:35:27 -0800

We knew there was a possibility the Fed would decide to cut rates during its two-day meeting, and this afternoon it announced a one-half percentage point rate cut. That brings short-term rates down to three percent, insinuating that right now the Fed is more worried about an economic slowdown than rising inflation. The WSJ added that the action is "capping an unprecedented eight-day period in which officials slashed rates massively to ward off recession risks."

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Fed Cut Rates Yesterday: Now What?

SavvySugar — Wed, 23 Jan 2008 07:54:07 -0800

Yesterday's news isn't the last we'll hear from the Fed regarding interest rates. Their two day regularly scheduled meeting is just next week, and another rate reduction may be announced by the time the meeting is adjourned. Rate cuts are being used to calm the markets and instill consumer confidence to keep us investing and spending. The three-quarter percentage cut yesterday and any future cuts could affect you in several ways. To see what they are please read more

Borrowing costs are lower for banks and so it's the Fed's hope they will pass these rates along to consumers and businesses.

Mortgage rates should be cheaper for those with good credit and money for a down payment.

If you're shopping for a car, you may be able to find a cheaper rate for a car loan.

If your credit card has a fixed rate nothing will change, but if your card has a variable rate you should see changes in about a month. Call your credit card company and ask them to lower your rate.

Interest on your savings accounts, money market accounts, and certificates of deposit will drop. But that doesn't mean you should give up on saving!

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News Flash: Fed Slashed Key Interest Rate This Morning

SavvySugar — Tue, 22 Jan 2008 11:31:46 -0800

The Federal Reserve board cut the target rate for banks’ short-term lending from 4.25 to 3.5 percent in response to the free fall that world financial markets have been experiencing. The emergency cut is meant to stimulate the economy and the announcement was made outside the normal meeting schedule. The Fed will still hold its planned meeting next week and there's speculation that they'll announce another cut then. Here's what an economics reporter at the Wall Street Journal had to say:

News Flash: 2007 Saw Fastest Inflation Jump in 17 Years

SavvySugar — Thu, 17 Jan 2008 07:52:52 -0800

Consumer prices rose in 2007 at the fastest pace since 1990. Prices rose the most for energy, food, health care, housing and education but they fell for clothing, new cars and computers. Core inflation - which the Fed closely monitors and excludes food and energy - dropped slightly and that's a sign of economic slowdown. This will be a big talking point when the Fed meets on January 30.

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