Does this mean that lenders are also lightening up on the loan requirments too? As the rates dropped in the past 12 months. Lenders tightened up on lending requirments. Thus causing a lot of borderline good loans to go in to the less desirable interest rates. It really dosen't do us any good to have low interest rates if we still can't get a loan at those rates due to requirments beyond our reach. I have spent the last few months getting all the errors off my reports. I have been 75% succsessful. I have not had my scores pulled yet. I am hoping after all this they have gone up. Last word from a lender was we had to have above 620 middle score just to get a 10% loan with a 5% down. What exactly do you have to have to get the 6% loans? Is there anyone out there that actually fits that mold? Becky
Becky: The prime rate only goes to member banks as far as I know. Maybe there are some other types of institutions out there that are also qualified for the prime rate that I don't know about, but to the best of my knowledge it is only the member banks that can get that kind of rates out of the FED. Then the member banks loan out to others at higher rates, sometimes seemingly usurious rates of interest being charged to consumers.
The rate that banks get from the Fed is called the discount rate. It's much lower than the prime rate. The prime rate is the rate that banks charge their best (usually corporate) customers. Some of us are approaching that rate (prime+0.9% from Citibank, for example.)
The discount rate is, for the most part, just a symbolic rate. The Federal government RARELY loans money directly to commercial banks, which is what the discount rate is used for.
For those interested in what the discount rate is here is a link. http://www.ny.frb.org/pihome/fedpoint/fed30.html
Please provide your references for this statement. Here is mine: http://www.msnbc.com/news/630046.asp?0dm=B1AWB Check under the 'definitions' tab on the 'How the Fed Affects You' article at the bottom of the page. Next time, when you have nothing intelligent to say nor the means to back it up, don't bother.
I read your article. I don't disagree with what IT says. You however are wrong. Do some research. I know much about this.
My issue is one of terms I suppose. The Fed is not the Federal Government. To me this is an important distinction to be made. I re-read your statement and know what you are saying. I will lighten up.
Jeff: I'm not very knowledgeable about these banking matters. Perhaps you can enlighten us a bit. It is my understanding that the FED (Federal Reserve Bank) is not even a governmental entity, but rather a private corporation. Is that true or not?
That is right Bill. The Federal Reserve Bank is our nations central bank but is not part of our federal government. I do feel badly about jumping on John over this as it is not widely understood and at first glance seems trivial. Anyone interested in the Fed will find researching it quite interesting.
Jeff and others: I don't want to get off into any buffoon wars over this, but Jeff is right about it being an interesting subject. It is also one about which I know little or almost nothing about. I've read a couple of books on the subject, one called Dr. Jekyl or something like that. Don't remember the title exactly anymore, but it talked about how the Fed was initially conceived and implemented. Do you know the book I'm talking about, Jeff or anyone?
I believe the book is "The Creature from Jekyll Island" by G. Edward Griffin. I have not read it though.
Yes, Jeff, That's it. I can remember most of what was in the book, so what comments do you have about the book? Did you agree with it's viewpoints?
I haven't read that particular book Bill. I have heard it is worth a read though. "Secrets of the Temple" by William Greider is one of the more widely known books about the Fed. If one wanted to learn about the central bank and the mystery surrounding it I would recommend this book. This subject really is far more interesting than most would imagine.
Sometimes my fingers move faster than my mind. I didn't *mean* the Federal government, although I typed it. I guess that this whole terrorist mess has me in one mode -- need to get out of it. No biggie. I think everyone follows. Thanks.
Thanks for being forgiving John. What you meant in your post was obvious and I was being "nit-picky". Have a good one. Jeff
Latest figures I saw: Prime Rate = 6% Federal Funds Rate = 3.5% Discount Rate = 3% Shimmer was right; the Fed rarely loans money directly to banks at the discount rate. If it does, that's considered a sign that the bank is in trouble. Banks borrow money from each other at the oddly named Federal Funds rate. If they have extra funds on deposit at a Federal Reserve Bank, they may lend them overnight to other banks at that rate. Banks lend YOU money by creating a deposit that offsets the loan. But legally, they have to back up that deposit with a fractional (10% or 12%, something like that) deposit of funds at the Fed. Too many artificially created deposits relative to their reserves (deposits with the Fed) causes them to need Federal Funds.
MSNBC is ahead of me on this one. The actual rates are: Prime Rate = 6.0% Federal Funds Rate = 3.0% Discount Rate = 2.5% I read the New York Times on Monday, and apparently remembered the OLD rates.
