| Interest rate cut spooks skeptics
The Federal Reserve handed out a second interest rate cut on Halloween, giving markets and borrowers the treat they were expecting. But skeptics questioned whether the quarter-point rate cut aimed at shoring up the housing market would unleash the specter of inflation on a day where gold and oil prices hit new highs. "If they hadn't cut interest rates, it would have been a disaster," said Ashwani Kaul, a senior analyst with Reuters Estimates in New York. Stock investors had priced in a cut, and the absence of one would have spooked markets in a big way, he said. The Dow Jones industrial average rose 137.54, or 1 percent, to 13,930.01, while the Nasdaq composite index rose 42.41, or 1.5 percent, to close at 2,859.12 Wednesday. Consumers should benefit from the Fed action via lower costs on variable-rate credit cards, auto loans and home-equity lines of credit, said Scott Anderson, a senior economist with Wells Fargo in Minneapolis.
Villains aplenty but few heroes in sad tale of debt tragedy
Behind every statistic on debt lies a very personal tragedy. An estimated 45,000 homes will be repossessed next year. In January the Consumer Credit Counselling Service will receive a predicted 34,000 calls from the desperate and the indebted. Such indicators are seized upon by those attempting to read the runes of our increasingly fragile economy. But the patterns they find mask individual stories of homes lost and furtive calls to faceless debt counsellors. The banks are the easy villains of the story, doling out cheap credit to anyone who asked nicely, regardless of their circumstances. But this is a subtler story than a pantomime of riches-to-rags consumers and the big bad bank manager. For every blameless victim ringing the helpline, there are countless more who knew their plastic cards had lost all elasticity and their mortgage was an albatross, but kept on spending.
In Search of a Subprime Villain
The panic of 1869 had Jay Gould and Jim Fisk. The junk-bond insider scandals had Ivan Boesky and Mike Milken. And turn-of-the-21st century book-cooking had poster boys Jeff Skilling and Bernie Ebbers. Now, the subprime meltdown cries out for its own icon—an easily vilified, Leno-quotable, high-seven-figured household name. If there were Vegas odds for this kind of thing, the money would be on Angelo Mozilo, founder and chief executive of Countrywide Financial (CFC), the largest U.S. mortgage lender and the source of so many of the bad home loans that have gummed up the global financial system. But don't finger Mozilo just yet. The scale, ripple effect, and emotional particulars of this bust make it uniquely hard to pin on one character. Countrywide will become less newsworthy as it is acquired by Bank of America (BAC), an outcome regulators want to hasten.
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