On Monday the Fed dropped interest rates by a full 0.75% out of the blue. Unprovoked, unannounced, and unexpected, both in scale and timing. Sure, The Street had predicted a rate cut, but no one was predicting three-quarter basis points, and few were predicting an unscheduled cut.

There is something strange about this move.

Big Ben Bernanke has been fairly slow to react to economic data, and has at most taken a half basis-point chunk out of rates at any one time. So why the big bite all of a sudden?

I suspect that there is more to this interest rate cut than pure economic data. If economic data were the driving factor behind a proposed rate cut, the decision to cut interest rates could have waited until the next Fed meeting. After all, it takes months for the effects of an interest rate cut to trickle down to the driving forces behind the economic health of this country: the common Joe’s like you and I.

I suspect there was something much more critical behind this move. I believe that some major financial player, one that helps stimulate the economy, was on the brink of failure. Nothing demands more immediate action than running out of money.

I don’t know who it was, but it was a financial company who is worth more to this economy alive than dead.

Only time will tell who it was.

Economics, Finance bernanke, Economics, Fed, interest rates