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No. The Dow's large drop today was triggered by the Fed cutting the fed funds target rate by 25 basis points (0.25%). Stock market investors were hoping that the Fed would cut 50 basis points, giving a further kick to the economy. However, cutting interest rates by too much at one time can make money too easy, adding to inflation pressures. I work on a trading floor at a major investment bank, and no one near me ment…
I think it's terrible that the Feds keep cutting interest rates. All it's doing is propping up Wall Street at the expense of individual citizens and the value of the US Dollar -- kind of like how China keeps the Yuan devalued at the expense of ordinary citizens. The last time the Feds cut interest rates this much, it caused a housing bubble.
Interest rates are nowhere near where they were at the beginning of the housing expansion -- the Fed Funds target rate was at 1% in 2003; it's at 4.25% now. Most people are saying that even in a recession scenario, the Fed will only cut to around 3%. Fed Funds aside, other interest rates remain high. LIBOR (the primary rate at which banks lend to each other) is around 1% above Fed Funds, depending on the maturity. Interest rates on corporate bonds are creeping up as lenders demand to be compensated for increased default risks. Swap spreads have widened. Consumer rates on mortgages and student loans are still relatively high, now that the secondary market for consumer debt has shrunk. Only Treasury yields remain low as investors seek the extra protection they provide. So it's not like the Fed has massively cut rates and money is sloshing through the system.
Second, excessively high interest rates can harm individual consumers. At the individual level, it means that you pay a higher rate to get a mortgage, buy a car, pay down your student loan, or whatever. The bigger effect is indirect though: companies can't borrow money to expand their businesses. This means lower employment growth, lower capital expenditures, less R&D, etc. People get laid off, paychecks are cut, consumer spending goes down. By cutting rates, the Fed believes (rightly, in my opinion) that they can at least alleviate these effects, even if it's impossible to prevent them entirely.
Lower interest rates aren't even that beneficial to banks. Banks earn money by lending it out. If they are forced to lend money at lower rates, they simply aren't going to earn as much revenue from interest. Wall Street banks also make money through things like trading, merger advisory, debt & equity issuance, etc. -- stuff that isn't really dependent on the absolute level of rates. A Fed Funds cut is hardly a Wall Street bailout.