Decius wrote:
This is very, very bad! Maybe Ron Paul is right about having a gold based currency. Interest rate changes are warranted to smooth the edges of the business cycle, not to bail out a bunch of transparently poor financial decisions made by borrowers and lenders! This is the most socialist, politically motivated, special interest serving thing that I have ever seen the fed do!

In the free market, those that made bad credit decisions must be allowed to pay the price, and only by paying dearly can lessons truly be learned. Borrowers who were unwitting and took on too much debt must learn that there are consequences for their actions. Homebuilders that built too many homes or overpaid for land need to face the consequences. Wall Street firms that provided credit to all of these activities with too much laxity must also pay a price. This is all part of a healthy correction.

When your other option looks like 1929, this may be the right call. I think the real issue is, you had a large number of institutions making huge numbers of risky loans. That's one thing, but the way they structured them virtually assured the loans would be defaulted on, and that may have been the intent. The lenders translate a loan into a property and a fraction of its real cost. The problem is, and here's where they screwed up, they now have no one to sell that property too. That's the sub-prime crunch in a nutshell, and it's driving real estate values down across the board.