>Lower interest rates immediately reduce Bank revenues from tracker
>mortgages, and thereby reduce the return to lending of any kind. If this is
>really, as often claimed, a crisis of banks refusing to lend, rather than
>being unable to find borrowers, shouldn't interest rates have gone up? If
>banks are failing, why reduce their revenue?
It only reduces their revenue if they pass on the rate cut to their borrowers. In Australia the official rate was cut by 1% two days ago, the banks have passed on .8% to home buyers, they've passed on nothing to credit card borrowers, So effectively the rate cut means a huge jump in profit margins.
So effectively interest rates have gone up. And Australian banks are doing pretty well. In fact the big banks are like sharks in a feeding frenzy, gobbling up small banks at bargain prices. That's what you would expect of finance sharks when there's blood in the water I suppose. The government is fawning and grovelling to them, the rate reduction was a bit like a ritual sacrifice. ;-)
Bill Bartlett Bracknell Tas