The Back Alley Archives

By Jon Markman
The Federal Reserve today will attempt to get out in front of the worst financial crisis to hit the world banking system in five decades by slashing short-term interest rates from their current perch at 3% to the lowest levels in years.

But its effort will have little effect on the ability of the average American to get a cheap loan for a new home, car or college education even as it has a large effect on U.S. banks' ability to fix their balance sheets by racking up fat profits.

If that sounds unfair, welcome to the latest episode of a brutal new American business ethic, in which the government bails out bad bets by risk-taking banking executives in New York with money that it borrows from middle-class families and foreign investors. The effort is gilded with fancy financial language and cloaked in the guise of a rescue that helps all citizens, but the reality is that Washington is essentially robbing the poor to help the rich.

It seems odd, but these are extraordinary times. Normally, when the Federal Reserve cuts the rate at which it lends money to U.S. banks, those banks in turn cut the rates at which they lend money to citizens and companies for personal and commercial use. Simple enough. Yet in the past few months, banks have made three important changes in their usual practice:

They have not been passing all of their interest-rate savings to customers.

They have restricted lending only to most creditworthy, documented applicants.

They have cut the total amount they're willing to lend.

Good for banks, bad for you
Banks are taking these seemingly perverse steps in an effort to reverse the effects of the massive losses they have withstood for lending too broadly to consumers and companies with lousy credit over the past five years.

They're pulling a big 180, which is as confusing as it is disheartening. Rather than providing funds to prospective home buyers and business people with legitimate needs for moving into larger homes or expanding factory lines, records show the banks are hoarding the low-cost money they're borrowing from the Fed and investing it in Treasury bonds paying higher interest yields. They're then pocketing the windfall profits to repair their own ravaged balance sheets[/size]

John Kenneth Galbraith once said that the only real socialism we have in this country is for the rich.

being in business is about making money...banks are in the business of making money too.

the quick, easy, surefire way to stimulate the economy is to allow more oil drilling.

the technological advances that have been made that will prevent oil spills and protect the environment are well documented...they should drill up in alaska, they should drill in the gulf, they should drill in my ass if there's oil...anything to alleviate the price of gas....anything to get us back to being a net exporter again....anything that creates jobs....anything that can get us in a place where we can take advantage of the oil prices and invest heavily on alternative fuel types thereafter.

the quick, easy, surefire way to stimulate the economy is to allow more oil drilling.

the technological advances that have been made that will prevent oil spills and protect the environment are well documented...they should drill up in alaska, they should drill in the gulf, they should drill in my ass if there's oil...anything to alleviate the price of gas....anything to get us back to being a net exporter again....anything that creates jobs....anything that can get us in a place where we can take advantage of the oil prices and invest heavily on alternative fuel types thereafter.

the quick, easy, surefire way to stimulate the economy is to allow more oil drilling.

the technological advances that have been made that will prevent oil spills and protect the environment are well documented...they should drill up in alaska, they should drill in the gulf, they should drill in my ass if there's oil...anything to alleviate the price of gas....anything to get us back to being a net exporter again....anything that creates jobs....anything that can get us in a place where we can take advantage of the oil prices and invest heavily on alternative fuel types thereafter.

I disagree. There have been studies that high oil and gas prices have yet to hurt the economy. People are still buying at the same or higher rate. Auto manufacturers are still selling low MPG SUV's at an alarming rate. High gas prices are simply the price of doing business anymore.

I disagree with that TT. People are seeing higher costs for good across the board because of increasing transportation costs. I think that higher gas prices are effecting the economy greatly.

I disagree with that TT. People are seeing higher costs for good across the board because of increasing transportation costs. I think that higher gas prices are effecting the economy greatly.

WASHINGTON — Drivers may be griping about record high gasoline costs, but the recent surge in the price at the pump will have little impact on most consumers and will be hardly noticed in the broad economy, say several economists, including those at Standard & Poor's, LaSalle Bank and the Federal Reserve Bank of Dallas.
Rising incomes will help offset higher gas prices for most Americans, they say. And although gas prices are at unprecedented levels, not adjusted for inflation, the price gains have come over a number of years, giving consumers time to adjust their budgets.[/size]

"It's going to slow things down … but luckily, consumers' pocketbooks are doing reasonably well," Standard & Poor's chief economist David Wyss says. "Some people are going to get hurt by this. But the overall impact on the economy is going to be fairly limited."

Low-income households that are already stretched thin are likely struggling to pay their higher gasoline bills, Wyss says.

The nationwide average price of a gallon of regular gasoline was $3.209 Tuesday, up more than a penny from Monday and 32 cents higher than a year ago, according to motor club AAA.

When analyzing the impact on the economy, it's important to look at the pace of change in price, not the level of the price, says Stephen Brown, director of energy economics at the Dallas Fed.

That's because over time, consumers and businesses adjust to higher prices. It's the sudden jumps that cause problems.

While economists debate whether the United States is in a recession or merely about to enter one, 38% of Americans say the nation is at least somewhat likely to enter another Depression. That figure includes 13% who say a Depression is Very Likely. A Rasmussen Reports national telephone survey found that 55% say a Depression is Not Very Likely or Not at All Likely. ...

Sixty percent (60%) believe that the federal gasoline tax should be suspended until gas prices come under control. Twenty-four percent (24%) disagree. Lower and middle-income Americans are even more supportive of suspending the gasoline tax.

Suspending the federal gasoline tax is supported by 65% of Democrats, 61% of Republicans, and 51% of unaffiliated voters.

wherever you got that from TT, throw it away and never read that publication again....that's rubbish.

fed of dallas huh? oil rich dallas huh?

it's simple math tt...costs rise every day....there's a monthly/weekly/daily assessment on allocation of funds/income derived by the average/normal salaried worker...how can someone not say that soaring energy prices are not affecting the economy? it is because if you can't afford to go to the movies, you don't go....if you can't afford to buy new sneakers, you cherish the old ones....if you can't afford to put the new roof on the house, you pray it doesn't rain....

energy costs effect everyone directly AND indirectly...

wherever you got that from TT, throw it away and never read that publication again....that's rubbish.

fed of dallas huh? oil rich dallas huh?

it's simple math tt...costs rise every day....there's a monthly/weekly/daily assessment on allocation of funds/income derived by the average/normal salaried worker...how can someone not say that soaring energy prices are not affecting the economy? it is because if you can't afford to go to the movies, you don't go....if you can't afford to buy new sneakers, you cherish the old ones....if you can't afford to put the new roof on the house, you pray it doesn't rain....

energy costs effect everyone directly AND indirectly...

Rad, fuel is cheaper in America, one of the richest countries in the world, then it is in almost every other country in the world. Minus the one's who subsidize it(Iraq, for instance). All of the countries that have very stable economies are consistantly paying $5/ gallon for gas. Go to Germany, France, sUcK etc and buy fuel and then come back here. You will be happy to pay $3.30/gallon. We have been spoiled for many years and we are finally catching up with the rest of the world.

I spend around $50/week in gas. I drive a 2005 FX4 F150 Ford. That is a four door, four wheel drive with a 5.4L V8. By far, not the most fuel efficent vehicle in the world and I spend $200/month. I know people that have a $150/ month cell phone bill. I know people that pay $100+ for satellite TV. How much do you pay a month for massages and haircuts? It is all relative.

this is the point, TT...a lot of consumers have gotten used to the lower price of gas here, what is spent in other countries be damned. your point on the satellite TV, cell phone, massages, haircuts, etc..is precisely the point. All luxury items...gas prices rise, less money for luxury goods, less luxury goods bought, worse for the economy.

this is the point, TT...a lot of consumers have gotten used to the lower price of gas here, what is spent in other countries be damned. your point on the satellite TV, cell phone, massages, haircuts, etc..is precisely the point. All luxury items...gas prices rise, less money for luxury goods, less luxury goods bought, worse for the economy.

this is the point, TT...a lot of consumers have gotten used to the lower price of gas here, what is spent in other countries be damned. your point on the satellite TV, cell phone, massages, haircuts, etc..is precisely the point. All luxury items...gas prices rise, less money for luxury goods, less luxury goods bought, worse for the economy.

i'll be honest and i'm not trying to be stupid cause we've got a GREAT FUCKING discussion going but if gas gets to the point by which i can't get a massage every month, i aint gettin one...i'm not going to the restaurants either if heating oil prices continue to skyrocket....and i'm not going on vacation if the costs of goods and services continue to rise based on energy costs being passed down to the consumer...who hurts? the state/city/county i am not vacationing at because i can't afford to....the massage therapist who does this on the side to pay for college....the waitress who relies on tips to pay for gas