News of the Federal Reserve dumping $200 billion into the troubled financial system sent stocks soaring almost 4 percent today. But it left some consumers wondering whether it will lessen the chance of a major rate cut, which seems be the most important thing to many consumers with ARMs resetting in the near future.
The Fed, in conjuction with central banks in Europe, Canada and elsewhere in the world, will offer loans to financial institutions and accept various securities as collateral. Some of these securities will be the mortgage-backed debt that has been wreaking havoc in the lending and financial markets since last summer.
According to some, this move will help financial institutions gain liquidity by exchanging their mortgage-backed securities for Treasuries, which are very liquid. In doing so, the Fed may not cut rates as much as the previously anticipated 75 basis points.