Lower rates? Do it! Now!

I know, I know – we’re supposed to be ticked off at the Fed for easing the discount rate and, in effect, insinuating itself into the debt crisis. Fortune’s Allan Sloan describes the central bank as enabling those rich and greedy Wall Street investors who thought nothing of “happily sucking up hundreds of billions of dollars’ worth of suspect mortgages from marginal U.S. borrowers – and begging mortgage makers to create more of them.” So now that the jig is up, with the full damage still to be determined, they’re all running to the Fed screaming, “Save us! Save us!” Except that the Fed won’t save those thousands of poor souls who got suckered into a home loan they had no business even applying for. For them there’s no bailout – they’re just stuck with a foreclosure notice and Grade Z credit rating.

It’s all so righteous and true, and yet when I saw the Dow jump 300 points early this morning after the Fed announcement, my instant reaction was, well, relief – and if you have money in the markets, you must have felt the same thing. The talking heads can tell you not to worry all they want, but if you happen to own Countrywide stock and have seen the value of your shares get cut in half, you’re more than worried. You’re freaking out. And you’re looking for whatever help you can get. Lower the discount rate? Do it! Hurry! Whatever it takes! Today, Countrywide stock jumped 13 percent. If this is a bailout for the fat cats – and I suppose it is – it’s also helping regular folks too. That doesn’t seem like such a terrible thing, at least right now. Of course none of this addresses the real problems – specifically, a mortgage industry that has gone largely unregulated (and by last year began to resemble a boiler room operation); and a corner of the securities market that not enough people really understood. When loans are bundled and then repackaged again and again, investors become clueless as to what they’re buying and selling. Not a good thing. Somehow those two problems need to be resolved, and the marketplace can’t do it alone.