All the smarty pants who make up the Federal Reserve met today to once again discuss the state of the economy and determine the action needed by them to aid a struggling American economy. One of the main things they do is determine what the Fed funds rate will be. The Fed funds rate is the rate at which banks lend to each other and is one way the Fed can regulate the supply of money to the US economy.

The following is an official press release from the Fed regarding its decision today, with a  translation (for the rest of us) mixed in for all the financial jargon by Bob Walters, Chief Economist for Quicken Loans. Obviously, our version is in bold. Enjoy!

Release Date: April 29, 2009

For immediate release

Now

Information received since the Federal Open Market Committee met in March indicates that the economy has continued to contract, though the pace of contraction appears to be somewhat slower. Household spending has shown signs of stabilizing but remains constrained by ongoing job losses, lower housing wealth, and tight credit. Weak sales prospects and difficulties in obtaining credit have led businesses to cut back on inventories, fixed investment, and staffing. Although the economic outlook has improved modestly since the March meeting, partly reflecting some easing of financial market conditions, economic activity is likely to remain weak for a time. Nonetheless, the Committee continues to anticipate that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a gradual resumption of sustainable economic growth in a context of price stability.

The Fed received super secret, on the low-down, information that the economy is contracting.  How do they figure this stuff out?!

The Fed also points out that the consumer continued to spend (you can’t hold a shopper down!), but that businesses have cut back significantly.

Lastly, they mention that all the money they are pumping into the economy ishelping and should continue to help as time goes on.

In light of increasing economic slack here and abroad, the Committee expects that inflation will remain subdued. Moreover, the Committee sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term.

They say here that because the economy isn’t doing well  (they call it “economic slack”), inflation (prices) will stay low.

In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and anticipates that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. As previously announced, to provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year. In addition, the Federal Reserve will buy up to $300 billion of Treasury securities by autumn. The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. The Federal Reserve is facilitating the extension of credit to households and businesses and supporting the functioning of financial markets through a range of liquidity programs. The Committee will continue to carefully monitor the size and composition of the Federal Reserve’s balance sheet in light of financial and economic developments.

This is the “kitchen sink” paragraph.  They say here that they will do everything in their power to pull the economy out of a tailspin.  Stuff like:

• Taking short term rates to 0% (yay!  Free money!)
• Spending $1.25 trillion to purchase mortgages to keep today’s mortgage rates low
• Buy $300 billion of Treasury securities (kind of a neat trick to buy debt from yourself…)

Questions? Just holler: blog@Quizzle.com

The 10 brilliant minds who make up the Federal Reserve met yesterday to once again discuss the state of the economy and determine the action needed by them to aid a struggling American economy. The Fed funds rate is one way the Fed uses to regulate the supply of money to the US economy.

No surprise, they decided to keep targeting the Fed funds between 0-.25%. In bigger news, they announced they would spend another $1.2 trillion buying mortgage-backed securities and other debts from Fannie Mae.  Immediately following the announcement, mortgage rates dipped about .375 points to under 5% on 30-year fixed loans.

That’s why many of you Quizzlers saw a mortgage rate alert on your homepage – we’re giving you the hook up! And you know who to call to help you out with your mortgage, right? RIGHT?! (hint, hint)

The following is an official press release from the Fed regarding its decision today, and a translation (for the rest of us) of all the financial jargon by Bob Walters, Chief Economist for Quicken Loans:

For immediate release

Now

Information received since the Federal Open Market Committee met in January indicates that the economy continues to contract.  Job losses, declining equity and housing wealth, and tight credit conditions have weighed on consumer sentiment and spending.  Weaker sales prospects and difficulties in obtaining credit have led businesses to cut back on inventories and fixed investment.  U.S. exports have slumped as a number of major trading partners have also fallen into recession.  Although the near-term economic outlook is weak, the Committee anticipates that policy actions to stabilize financial markets and institutions, together with fiscal and monetary stimulus, will contribute to a gradual resumption of sustainable economic growth.

The Federal Open Market Committee (10 people who decide things for the banking system), also known as the “Fed”, is seeing that the economy is getting worse.  Job losses = less spending by consumers.  Businesses can’t borrow = less spending by businesses.

Despite all that bad news, the Fed feels that, over time, all the money they have pumped into the economy will start to turn the economy around.

In light of increasing economic slack here and abroad, the Committee expects that inflation will remain subdued.  Moreover, the Committee sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term.

Given that the economy is essentially a train wreck, and given that people will be spending less, and given that when people spend less companies have to lower prices – the Fed expects that prices (inflation) will remain low.  In fact, the Fed is more worried that prices might actually fall (which, believe it or not, is also bad for an economy).

In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability.  The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and anticipates that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period.  To provide greater support to mortgage lending and housing markets, the Committee decided today to increase the size of the Federal Reserve’s balance sheet further by purchasing up to an additional $750 billion of agency mortgage-backed securities, bringing its total purchases of these securities to up to $1.25 trillion this year, and to increase its purchases of agency debt this year by up to $100 billion to a total of up to $200 billion.  Moreover, to help improve conditions in private credit markets, the Committee decided to purchase up to $300 billion of longer-term Treasury securities over the next six months.  The Federal Reserve has launched the Term Asset-Backed Securities Loan Facility to facilitate the extension of credit to households and small businesses and anticipates that the range of eligible collateral for this facility is likely to be expanded to include other financial assets.  The Committee will continue to carefully monitor the size and composition of the Federal Reserve’s balance sheet in light of evolving financial and economic developments.

The Fed will keep short term rates (the rates at which banks borrow from each other) at 0%.  That was no surprise.
What was a surprise (and a happy one for those of us at Quizzle & Quicken Loans), was that the Fed decided to go on a shopping spree that would make Donald Trump blush.  The Fed decided to:

•    Purchase an ADDITIONAL $750 billion of mortgage backed securities (on top of the $500 billion they agreed to buy last November).  THIS is the decision that caused mortgage rates to fall significantly.
•    Purchase an additional $100 billion of Fannie Mae and Freddie Mac debt.  This will allow those companies to buy up more loans – which will also be good for mortgage rates.
•    Purchase $300 billion of long term Treasury securities.  This will drive down government rates.
o    So – in sum, the government just agreed to spend $1.2 TRILLION.  They will be putting it on their credit card.  (How would you like to get that bill?!)

Quizzle has it’s own video now! A couple of very talented peeps from the Quizzle Marketing team put together this super simple video to describe Quizzle. While I could say a million super things about Quizzle, I think this video really does it in a special way.

We’re really excited that Quizzle is now in movies! Our hope is that more people learn about how useful Quizzle can be to their financial goals. Check out the video above, or see any of our lovingly produced Quicken Loans videos, designed to bring clients all the information they need to make smart financial decisions!!!!

At Quizzle, we’re all about awesome freebies – especially ones that could help get you on the right financial path! Duh…Quizzle is free and full of freebies, right?

So, here is a very cool freebie from TV Queen Oprah and her favorite finance expert, Suze Orman. From now until Thursday (January 15), you can download Suze’s new book, the “2009 Action Plan,” for free! It’s  over 200 pages and goes over everything from credit to real estate to 401k to saving for college.  Pretty awesome!

But you do have to hurry – it won’t be available after Thursday. So get over to Oprah.com and download it! Heck, with your free credit report in Quizzle and Suze’s advice, you can totally get yourself on the right financial path in 2009!

The 10 brilliant minds who make up the Federal Reserve met yesterday to once again discuss the state of the economy and determine the action needed by them to aid a struggling American economy. The Fed funds rate is one way the Fed uses to regulate the supply of money to the US Economy.

In an aggressive move, they lowered another .75 percent, targeting a new Fed funds rate between 0 – .25%. This is the lowest Fed rate on record (I looked).

The following is an official press release from the Fed regarding its decision today, and a translation (for the rest of us) of all the financial jargon by Bob Walters, (who is EVEN SMARTER than me – GASP!) Chief Economist for Quicken Loans:

Release Date: December 16, 2008

For immediate release

Now

The Federal Open Market Committee decided today to establish a target range for the federal funds rate of 0 to 1/4 percent.

This is a new one.  Usually the Fed (that group of bankers that determine what short term rates will be) establishes a specific target rate.  This time they have established a target RANGE.  Fancy… it is quite extraordinary that they have taken short term rates effectively to 0%.

Since the Committee’s last meeting, labor market conditions have deteriorated, and the available data indicate that consumer spending, business investment, and industrial production have declined.  Financial markets remain quite strained and credit conditions tight.  Overall, the outlook for economic activity has weakened further.

In the last 6 weeks or so, lots of people got laid off, and both people and businesses are spending less dough.  Banks are tightening lending guidelines  And the economy is in a general uphill battle.

Meanwhile, inflationary pressures have diminished appreciably. In light of the declines in the prices of energy and other commodities and the weaker prospects for economic activity, the Committee expects inflation to moderate further in coming quarters.

Prices of stuff is falling.  Given that gasoline and oil prices, food and other raw material prices are falling, and given that the economy is likely to continue to be struggle, the Fed thinks the price of stuff will continue to be low for months to come.

The Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability.  In particular, the Committee anticipates that weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time.

The Fed is throwing the kitchen sink, the dishwasher and the Ginsu knives at the problem.  They have taken short term rates to 0% and they are spending money to fix things as if they could just print it on paper (oh…  they can…)  Given the economy’s struggles – the Fed believes that short term rates are going to stay low for quite a while.

The focus of the Committee’s policy going forward will be to support the functioning of financial markets and stimulate the economy through open market operations and other measures that sustain the size of the Federal Reserve’s balance sheet at a high level.  As previously announced, over the next few quarters the Federal Reserve will purchase large quantities of agency debt and mortgage-backed securities to provide support to the mortgage and housing markets, and it stands ready to expand its purchases of agency debt and mortgage-backed securities as conditions warrant.  The Committee is also evaluating the potential benefits of purchasing longer-term Treasury securities.  Early next year, the Federal Reserve will also implement the Term Asset-Backed Securities Loan Facility to facilitate the extension of credit to households and small businesses.  The Federal Reserve will continue to consider ways of using its balance sheet to further support credit markets and economic activity.

This paragraph basically says that the Fed is going to spend A LOT of money buying bonds from Fannie and Freddie and buying mortgages to help out the mortgage market (hooray!) Beginning next year, the Fed will use the Term Asset-Backed Securities Loan Facility to help in extending credit to small businesses and others.  In other words – since the banks in America have tightened lending – Uncle Sam is going to help!

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Christine M. Cumming; Elizabeth A. Duke; Richard W. Fisher; Donald L. Kohn; Randall S. Kroszner; Sandra Pianalto; Charles I. Plosser; Gary H. Stern; and Kevin M. Warsh.

All the smarty-pants agreed.

Kelly’s Nerdy Notes: If you’re reading this and haven’t considered talking to a mortgage expert about refinancing, you may want to check your pulse. 30-year fixed rates are hovering in the low 4-5% range right now and for mortgage nerds like me, well, that’s kind of like having a party in my number-crunching head.

My strongest suggestion is not to wait. This kind of history is usually short-lived. All homeowners should take 15 minutes to make absolutely sure they’re in the right mortgage. This is, for lack of better nerdy words, a truly historic time in the world’s economy. And ….lucky you, your friends at Quizzle and Quicken Loans are ready to help.

Questions? I love e-mails! KLaVaute@Quizzle.com