In case you haven't heard, short term interest rates are super low right now. In fact, they can't go too much lower. Since the end of 2008, the Fed Funds Rate has been between 0 and .25%. This is an overnight rate target, and supposedly can change any time. It has not changed at any time for the past few years though.
Banks borrow from the Fed at this rate. This has been great news for the banks, give them cheap money, and they can get to work making more money from it. The problem is, it hasn't been quite so easy for everyone else, people and businesses to get that cheap money (I've just gotten declined for a credit card, and that wasn't even the cheap money!) so that they too can make more money.
Former FDIC chair Sheila Blair has come up with a great solution: Let EVERYBODY borrow from the Fed! With cheap loans, we can start businesses, or just invest in bonds and make easy money just like banks are. The article is well worth a read, it explains how anyone with access to this incredibly cheap money has prospered over the past few years.
Independent, Fee-Only Financial Advisor
