Saturday, January 30, 2010


BANZAI7 NEWS--The Federal Reserve's No. 2 official issued a stern warning to investors, banks and other financial institutions Friday: Don't be complacent, interest rates are going up at some point and they will trigger new market turmoil if you're not prepared.

"We are in uncharted waters for monetary policy and the financial markets," Donald Kohn, vice chairman of the Federal Reserve, said in a speech to bankers at the Federal Deposit Insurance Corp.

Rattling off a long list of uncertainties—including a rising budget deficit, foreign demand for U.S. debt and the strength of the recovery—Mr. Kohn said bankers need to start preparing now for the risk that interest rates could move swiftly in unexpected directions, most likely up.

WB7: Reading between the lines, this guy is telling banks not to lend money at today's cheap rates since rate increases are a certainty.

Here is a decade old article pondering why banks won't lend.

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