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One very critical point which is widely forgotten is that the Fed and
Treasury reliquified the banking system by driving rates down to levels
which deprived huge numbers savers of adequate returns on their insured
deposits in financial institutions. It was this huge drop in returns
which drove conservative (money market and CD) savers from banks into
the equity markets seeking decent returns on their savings. As is so
often the case, the shift into equities has been taken to extremes and
those conservative savers are now getting whacked once again as their
portfolios decline. On the banking side of the equation, we now have a
system of securitized banking which has never been tested in a bear
market or serious recession.
Earl
----- Original Message -----
From: "BruceB" <bruceb@xxxxxxxxxxxxx>
To: <realtraders@xxxxxxxxxxx>
Sent: Wednesday, November 29, 2000 9:07 PM
Subject: Re: Re: [RT] Alan Greenspan
>
> > Greenspan is VERY much a responsible party to the position this
country is
> > in. In the early 1990s, the Fed, in an effort to reliquify a
> > balance-sheet-troubled banking system (due to shoddy lending
practices),
> cut
> > interest rates drastically, engineering the steepest yield curve in
> decades.
> > Banks were able to borrow short-term and pocket up to 5 percent in
profit
> > from loaning to the bond market at the higher long-term rate.
>
> Yes, and the strategy worked perfectly.
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