Fed Shuffling Off Vs. Quick Exit

The idea that the Federal Reserve may quicken its scaling back of its emergency market lifelines appear to be a bit of a pipedream.

While the Fed recently eliminated a liquidity program for money markets and moderated a minimal number of other facilities, it basically kept its liquidity safety net in place and extended the term of most of its programs, as it remains concerned that present financial strains will continue for a while.

Clearly the Fed's "exit strategy" will require extra finesse as to not decimate the recovery, or spawn excessive inflation.

Even though interest remains at a near historic low, a trip to any branch of a major institution - such as, but not limited to, Citigroup (C - Analyst Report), Bank of America (BAC - Analyst Report), JPMorgan (JPM - Analyst Report), Wells Fargo (WFC - Analyst Report) and US Bancorp (USB - Analyst Report) - reveals that interest rates have crept-up by more than 100 bp over the past month, and these institutions also are charging a point or more.

What remains very interesting is that these same institutions are buying newly minted loans from mortgage brokers (typically carrying lower interest rates).