National Association of Home Builders Applauds Fed's Latest Rate Cut

On Tuesday afternoon, the National Association of Home Builders (NAHB) announced that it found the Federal Reserve's decision today to cut its overnight lending rate by another quarter-percent to be a wise and helpful move.

NAHB President Brian Catalde, a home builder from El Segundo, California, also said that the Fed should be prepared to act again and on a moment's notice should financial markets need to be stabilized and investor confidence further buoyed. In addition, he called on the Senate to move swiftly on several pieces of legislation that would help to ease the pain felt in the credit markets and increase the liquidity of financial markets.

"The Federal Reserve's...rate reduction...shows that it is determined to cut interest rates as needed in order to keep the economy moving forward...The Senate should move quickly to approve House-passed initiatives that will modernize FHA, provide tax debt forgiveness when the terms of a mortgage are renegotiated and a portion of the loan is forgiven, strengthen the regulatory oversight of the GSEs and allow Fannie Mae and Freddie Mac to purchase mortgages in high-cost markets," he said.

The central bank's decision was passed by a vote of nine to one as it also lowered its direct-to-bank lending rate by the same amount, so that it fell to 4.75%.

However, many on Wall Street were not impressed by the move, calling it a "half-measure". Many were expected, and hoping for, a rate cute twice as large as the one the Fed voted to enact.

The Fed's official statement on its assessment of the market and the reasons for its decision said, "some inflation risks remain...recent developments, including the deterioration in financial market conditions, have increased the uncertainty surrounding the outlook for economic growth and inflation."

As a result, the Dow Jones Industrial Average, which has seen significant gains recently and began the morning poised to possibly reach a record-high by the close of the markets on Friday, fell nearly 300 points, a loss of over 2%.

Some economists have recently opined that one of the greatest contributors to the lending and borrowing practices that sent the American economy into a tailspin-if not a feared recession-in the second half of 2007 was the "pure fantasy" that people can afford a home that is valued at more than 10 times their annual incomes, and the mortgage products that were created to allow this to happen only fed the delusion among borrowers. These have also said that the federal government's "teaser freezer" deal is nothing more than a dubious way of prolonging the inevitable and harming the housing market as people do not have any incentive to face reality.

Origional Newswire Source:
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