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What can the Fed possibly do now?

Allan Sloan is a senior editor-at-large at Fortune

TEXT OF INTERVIEW

Scott Jagow: I'm sure the Federal Reserve has more tricks up its sleeve, but it seems to be out of moves. Last week's interest rate cut to about zero leaves little room for anything else.

And so we turn to Allan Sloan from Fortune Magazine. Allan, we've been talking about the Fed all year. What else can they possibly do?

Allan Sloan: Well, years ago, in a speech that got Bernanke the unwelcome nickname of "Helicopter Ben," he talked about combating deflation by throwing money out of helicopters. I don't think we've chartered the helicopters, but they're throwing money now at everything. I wish they would throw some to me -- you know, could get a helicopter and have several big bricks of currency land in my backyard, because that may make me whole for the year, considering how much I've lost in the stock market.

Jagow: Right. Well, we did see that the interest rate cut seem to spill over into the housing market, the lowest mortgage rate on 30-year fix since the 60's. So maybe we're starting to see the ice break a little bit?

Sloan: That would be nice, but you and I have been having this conversation now for 16, 17 months. I really want this to work, because we need to stabilize the system and get these genius banks who've lost hundreds of billions of trillions of dollars doing things they didn't understand, to get them lending again. But we've done so many things, sooner or later, something will work -- I just hope it's sooner.

Jagow: But we're heard numbers from the Fed itself that the bank lending is at a record high. And based on some of the e-mails I've gotten from bankers, they're saying, we want to lend, but there just aren't enough people who are creditworthy, because we don't want to slide back into that situation we had before.

Sloan: Well that may well be, but you wonder how they're defining "creditworthy." Because right now, based on what I hear, it's becoming very, very difficult to finance a car. And that's the whole lifeblood of the car business. There are endless anecdotes of borrowers who are very sound saying the bank is telling me I have to repay, and they won't rollover my credit, because I'm sound, and they can get me to pay, but they can't get other people who aren't sound to pay. So the banks claim that they're doing this, they claim that they're doing that, I don't know. Sooner or later, it'll work out, because it always does. It's just that it's taking a long time and there's been a lot of pain.

Jagow: Allan Sloan from Fortune Magazine. Thanks.

Sloan: My pleasure, Scott.

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