Rate cut? Bah, humbug!

Meanwhile, the markets are taking advantage of clear central bank willingness to do absolutely anything to lubricate the credit markets and are refusing to budge (upwards) in response to most recent global actions and the US stimulus package. Why should banks loosen credit now, when money is only going to get cheaper if they don't? There is plenty of liquidity available to the banking system. Banks have been reluctant to pass along low rates to consumers since last year and have simply been beefing up operating margins to cushion against credit losses.

If central banks and governments are interested in improving the availability and cost of credit to business and individual consumers, they need to take a regualtory step along with rate cuts and increased liquidity measures. All Fed, ECB and SNB et al actions would be far more effective if coupled with mandated cuts in the cost of credit to small businesses and credit-worthy consumers. For a limited time, the maximum spread between funding costs and lending APR could be fixed for a variety of key credit products, such as small business loans for capital projects and credit consolidation for consumers.