Carol H Tucker Passionate about knowledge management and organizational development, expert in loan servicing, virtual world denizen and community facilitator, and a DISNEY fan
Contact Me Subscribe to this blog
beladona Memorial Be warned:in this very rich environment where you can immerse yourself so completely, your emotions will become engaged -- and not everyone is cognizant of that. Among the many excellent features of SL, there is no auto-return on hearts, so be wary of where your's wanders...
From the Banc Investment Daily for today: "• Rate Hikes: The Fed has upgraded its phone system reportedly to have maximum flexibility when contacting the press for impromptu briefings when it begins to raise interest rates or other significant events occur."
In and amongst the financial news, the speculation of just when the Federal Reserve is going to raise rates has been rife. Notice I said WHEN the rates will go up, not IF. Borrowers are rushing to refinance and some commercial lenders are giving out fixed rate terms for long periods of time, like ten years. This is a problem.
Why? Rates have been unusually low since 12.16.2008 when PRIME hit 3.25%, and before that the PRIME rate actually was falling for a 1 ½ years [since it was 8% on 06.29.2006]. That means for the past nine years, lenders and decision makers have been accustomed to either a low or steady interest rate and have planned accordingly. The folks who remember the days back in 1980’s and 1990’s when PRIME bounced around almost every day, who lived through a rising rate environment and know how to hedge the risks that entails, are pretty much gone now. The planning and risk management committees have forgotten that once PRIME soared to 20.5% [May 1981] and no longer have safeguards in place to handle the rising rate environment. Lenders have put assets on their books that will not reprice with the changes in the market and that is going to cause problems with capital and investments. Anyone who lived through the crisis with the US Savings & Loans and Thrifts will remember what happens when you are locked into a set of low-interest assets during a high-interest period!
CEOExpress
