Struggling Economy Lead to Cuts in Interest Rates

In January 2008 the Federal Reserve with Ben Bernanke at the helm cut interest rates to 3.5% from 4.25%. This was the greatest reduction in rates since 1990. Since 2001 this was the first time that funds rates were changed between meetings. The cut came after concerns were voiced about the weakening economy. Yet, Wall Street took a hit in spite of this.

The cut in rates was approved eight to one in order to act in a timely manner. The fact this was done a week before a scheduled meeting shows just how serious the state of the economy actually is.

Prime lending rates drop down to 6.50% from 7.25 percent by commercial banks in response to the feds cutting rates. Before the January reduction in rates the feds had already cut rates three times since September 2007. September saw a reduction of half a point with October and December both seeing an additional cut in rates of a quarter point each.

In April 2008 the feds cut rates once again by a quarter of a percentage point. The rate that banks lend money to each other went from 5.25% to 2% in an effort to help the economy and get the country out of the recession. This rate affects short-term things such as credit cards and auto loans however it will not change the interest rates of long-term loans such as mortgages. While future cuts may not be out of the question they are not happening at this time.

The Current Chairman of the Board

Born in December of 1953 in Augusta, Georgia, Ben Bernanke was sworn in as a member and Chairman of the Board of Governors of the Federal Reserve System on the first of February in 2006, replacing Alan Greenspan after eighteen plus years. He is also Chairman of the Federal Open Market Committee, which is the primary policy maker for the monetary system. His run as chairman will be up the 31st of January in 2010 and appointment as a member on the board will be up the 31st of January in the year 2020.

What Qualifies Bernanke?

He graduated from Harvard University and also posses a PhD in economics from the Massachusetts Institute of Technology.

Bernanke was previously the Chairman of the President’s Council of Economic Advisers. He served there from June of 2005 to January of 2006. He has done several things in the Federal Reserve System so far. From 2002 to 2005 he was on the Board of Governors of the Federal Reserve System and from 1987 to 1989 he was a visiting scholar at the Federal Reserve Banks of Philadelphia. In Boston from 1989 to 1990, New York from 1990 to 1991 and from 1994 to 1996. He also served as a member of the Academic Advisory Panel at the Federal Reserve Bank of New York from 1990 to 2002.

Ben Bernanke even taught as a Professor of Economics and Public Affairs at Princeton for a period of two years. He has also taught at various other universities and has had numerous articles on economic issues published. He has written several books and two textbooks to add to his credit.