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My Two Cents

The Discount Rate Cut

Chris Farrell Aug 17, 2007

There’s more financial market tubulence ahead. Okay, that’s a safe forecast. Still, the the Fed’s dramatic cut in the discount rate is probably enough to ease up the credit crunch. The conventional mortgage market should calm down in coming weeks.

That doesn’t mean there won’t be trouble. I expect that less attention will be paid to subprime mortgages and more attention to leveregaed buyout deals. There’s a lot of takeover debt that can’t be syndicated these days. The bank are stuck with owning the paper. Credit standards had gotten far too lax in the leveraged buyout market, and we haven’t seen the full extent of this fallout.

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