I'm not into conspiracies. I'm with you Andrew I think this just the Fed admitting that the problems might be bigger than it initially thought. The funny thing about the markets is that can be self fufilling prophecy.

An article on today's Fed action in the New York Times begins with this line:

"Saying it now feels that the recent disorder in financial markets has raised the risk of an economic downturn, the Federal Reserve today approved a half-percentage point cut in its discount rate on loans to banks."

http://www.nytimes.com/2007/08/17/business/18markets-web.html?_r=1&hp&oref=slogin

WTF??? Isn't this ass backwards? I mean, the recent disorder in financial markets is a RESULT of an economic downturn, isn't it? More and more people can't even pay their damn mortgages, for cryin' out loud!

"The economic statistics put out by the US Government are propaganda, pure and simple...Issued by government agencies, interpreted by spokespersons for the Government and the financial community ... the information we get has been manipulated to mould a public understanding favourable to the agenda of the powers that be."

-economist Peter D. Schiff

http://www.news.com.au/business/story/0,23636,22234638-462,00.html

Insofar as "conspiracy theories", isn't this precisely why anti-trust laws were enacted? It's not like we can inherently trust people just because they have power and money!

P.S. SEE:

Plunge Protection Team

http://www.washingtonpost.com/wp-srv/business/longterm/blackm/plunge.htm

And:

"We have the responsibility to prevent major financial market disruptions through development and enforcement of prudent regulatory standards and, if necessary in rare circumstances, through direct intervention in market events".

-Remarks by Chairman Alan Greenspan at the Catholic University Leuven, Leuven, Belgium (January 14, 1997)

http://www.federalreserve.gov/Boarddocs/Speeches/1997/19970114.htm

well,as a trader,this was my week to find out if we had a return of Volcker or anouther Greenie.we have Greenie on steroids-he not only planned this on options expiration,by doing this pre-market,he trapped many shorts into a big loss on the first print of the day.he talked the inflation talk,but he is just one more fool who will creat one more bailout.

how come it's always the "free market at any cost" guys who scream for a bailout first?kiss the dollar goodbye,and be sure to own some gold,when folks blow bubbles,that's always the last one,and they've blown all the other bubbles.how shall i say this?oh yeah,we're screwed....

if Greenie hadn't lowered rates to 1%,we would have had a nasty ressesion instead of a housing bubble,and be on our way back by now(and bush would have most likely lost the last election).capitalism is a two way street,a creative/destructive cycle.you get a boom,you have a bust.you can't have one without the other in a true free market,and the longer you put it off,the worse it will be...

Aside from the issue of moral hazard, a Bernanke put rather than a Greenspan put can be a bad sign as the Greenspan put encourages banks to lend to each other while the Bernanke put has the Fed as the lender.

A possible interpretation is that banks are in enough trouble that a) they can't readily lend to each other and/or b) they don't trust the borrowing bank not to have undisclosed or undiscovered problems.

The implication is that those who are suppose to be in the know, know that they don't know, and that what they don't know can hurt them.

As for everyone else, the only thing we know for certain is that the Fed will help the financiers and the consumer will pay.

The drawback to the "Greenspan put" is that it qualifies as what economists like to call a "moral hazard." It gives traders an unwarranted sense of security that encourages them to take unjustifiable risks with their money, because they know that the Fed will always bail them out.

That's what really, really hacks me off. How often the Fed protects the little Mama's boy stock traders. As a fixed income investor, I had to wait over two fucking years for interest rates to get to the point I earned a decent yield (now 5% in a money market). This is with taking inflation and other risk.

Meanwhile, the little stock speculators suffer an itty bitty correction and they start bawling for Nanny Fed to bail their slimy asses out. WHY? You play the market, you need to take the bad with the good - just like me with CDs, money markets etc. Point of fact, that damned over-inflated, leveraged (on debt) market ought to have fallen at least another 800 maybe more.

But oh no, nanny Bernanke had to rush in like that crapper Greenspan before him, to give an artificial boost by lowering the discount rate to 5.75%. And next he plans to lower the main fund rate by a quarter percentage point on Sept. 18 which will affect ME!

Screw you fucking Maul Street stock scheisters. I hope you all get clobbered with a correction or downturn of at least 1200 pts, and so fast, Bernanke won't have time to get his jammies changed, far less meddle with interest rates to help speculators again!

Whiny little shits that like to brag when their bubble hits "14,000" but can't take the downsides when it tumbles into the shithole.

An alternative theory to the "Bernanke put" is that Mr. Fed himself is cooly allowing the riskiest of investors to eat their crow. That the Fed didn't cut its more important rates earlier could be indicative that Bernanke et al. were looking to give the credit blow-out a soft landing. Perhaps there is more subtlty in the Fed's decision to cut the discount rate: "We're there to protect the country from a full-on recesion, but we're not going to bail out the most egregious lenders from their hyper-risky operations."

Would Greenspan have cut rates four weeks ago to avert this crisis? If he had, what would these lenders have learned? At least from the Bernanke perspective, there are several millionaires who are out of the predatory lending game. Now if only the Fed had a low-income house-owner put option on the table.