FED CUTS DISCOUNT RATE, ADMITS CONCERN

Last Friday the Fed, acknowledging for the first time "the risk of an economic downturn," cut its discount rate from 6.25% to 5.75%, "encouraging the nation’s banks to borrow directly from the Fed." Following the announcement, the Dow Jones changed direction and shot up 1.8 percent on Friday morning.

The move came at the realization that even creditworthy homebuyers are now having trouble obtaining mortgages, and is particularly notable given that "the Fed’s standard practice, for more than a decade, has been to change rates and issue statements only at scheduled meetings of policy makers." But as the stock market continues to falter, the Fed's chairman Ben Bernanke scheduled a conference call during which the policy makers voted unanimously on the lowered discount rate.

While the cut signals that even the Fed has found it necessary to admit economic fears, at the consumer level, it seems people--for the moment--are more frustrated with the high prices of food and gas than they are suffering from a dread of economic crises, according to a recent study done by the University of Michigan.

To read the New York Times article in its entirety, go to Fearing Slide in the Economy, Fed Cuts Its Discount Rate