After a busy weekend, Ben Bernanke is clearly tired of giving the markets absolutely everything they want. Instead, he’s just giving them nearly everything they want. Today’s 75bp cut is actually a 100bp cut in the discount rate, at least from last week, and if you include all the liquidity that the Fed is now willing to pump into investment banks, it should have much the same effect as the 100bp monster cut that the market was hoping for on Friday.
I like this move. Bernanke waited until a scheduled meeting to make the cut, and when he cut he didn’t panic, while still ensuring that a lot of liquidity would enter the financial system. If stocks decline from their intraday highs, so be it, the Fed’s already demonstrated with Bear Stearns that it’s not overly concerned about protecting shareholders. The bigger risk is that the spread tightening we saw this morning will be reversed, but I’m hopeful with respect to the momentum in that market. Well done.