I found this quote from Adrian Van Eck to be rather intriguing:
“Did the Fed get the result it desired from shoving rates down like this? You tell me what you think. The two biggest banks actually loaned out less money in this month, according to reports, than they had in the month prior to their being handed $45 billion apiece of money from the U.S. Treasury. Meanwhile, small banks which had refused to accept even one penny of Treasury money had stepped up their lending aggressively.
Most small banks are run the way banking used to be done and is supposed to be done. They take money in from savers-depositors. They lend it out to their own customers whom the managers and bank officers come to know well. They finance local business needs and local mortgages, often keeping the mortgages in its own portfolio. It was mostly loans from local and regional lenders that made it possible for home sales to actually turn up in the most recent month’s data.
My question is this: Does the Fed feel very low rates have done their job? Have they begun to edge rates back up even as markets have been distracted by the stimulus debate?
And tomorrow we may likely bail out all the wrong banks.
More on Adrian Van Eck can be found here.