The Fed cut its discount rate by 75 basis points, even when the street predicted a 100% chance of a full 100 point cut.

Whats more important though is that Goldman Sachs (GS: chart, web, Y!) and Lehman Brothers (LEH: chart, web, Y!) both reported smaller than expected profit declines, easing fears that the liquidity crisis that sank Bear Stearns (BSC: chart, web, Y!) could spread to other investment banks. While normally I don’t view a “smaller than expected decline” report as overly bullish, I do believe it helps isolate the investment bank crisis to a smaller field.

On top of the report The Street lauded comments from both institution’s about their liquidity positions as well as the absence of any big surprises on leveraged loan or mortgage-related writedowns.

I don’t know that we’re fully out of the water just yet, but I think we’re close. At least for another quarter.

Something to watch tomorrow:

The Visa IPO. They’re offering of 406 million shares at $44 a share, topping the previously estimated range of $37 to $42 a share. Visa shares will trade on the New York Stock Exchange starting Wednesday, under the symbol “V”.

I think it’s telling they’re going forward with the largest IPO ever in todays market condition.

Finance BSC, Fed rate cut, GS, LEH, Visa IPO

A few events to remember for next week:

Goldman Sachs reports earnings – March 18th, 8:30am
Goldman Sachs finished out 2007 in good shape with shares exceeding analysts predictions. However, Goldman’s true isolation from mortgage backed securities will be revealed in earnings for the next several quarters. With the bail out of Bear Stearns, I’m sure the street will be on pins and needles to see how well Goldman is fairing in this volatile market place.

Federal Open Market Committee meeting – March 18th, 9:00am .
Traders in interest rate futures have a 3/4% cut in the fed funds rate in mind and increasing evidence that the U.S. economy may be facing a recession will help stimulate that speculation. Is it just coincidence that the meeting is taking place just after Goldman reports earnings? Probably.

Bear Stearns, Morgan Stanley report earnings – March 20th 8:30am
This isn’t going to be pretty. We already know Bear Stearns ran out of liquidity, and now we’ll see the numbers to back it up. On top of that, we’ll see how wide spread the problem is when Morgan Stanley posts earnings as well. I suspect Thursday will be a rough day.

We’re going to get a glimpse this week into how bad the health of the finance sector really is. I’m predicting another rate cut on the order of a half point, as I think the effects of interest rate cuts are going to be fairly limited for the next few months. The idea is to drive money back into the market, but with the stock market so volatile right now, that idea isn’t really bearing fruit.

I still say the Fed should leave rates alone and let this financial debacle we’re in run its course, let the smoke clear and then see how low rates need to go to stimulate the economy.

Banking, Credit, Economics, Finance, Market Trends BSC, Fed rate cut, FOMC, GS

Well, by now the 25 basis point rate cut is old news. It’s interesting to see the mixed reaction to the cut; some say it wasn’t enough and that The Street was expecting 50 points, others say that the Fed should quit trying to save the economy from recession and let the free market play out.

A few highlights:

This Fed continues to display their cluelessness. They will definitely have to cut more times, so just GET IT OVER WITH now. Silly Fed. -Jordan, In The Money

What is the right number for interest rates? 4%? 3%? 2%? No one knows for sure, and that’s the problem. Investors are becoming like Pavlov’s dogs, frothing at the mouth at the mere thought of an interest rate cut. Once the Fed accedes to their wishes, they are satisfied for a while but wind up wanting more and more cuts.

As today’s market action shows, these people are never going to be satisfied. -Jonathan Burr, Blogging Stocks

The Corner Office Take

In my opinion, Bernanke should have left the interest rates alone. The Fed doesn’t make an economy, and it can only soften the edges of the peaks and valleys.

My Emigrant Direct account will probably take a hit, and the threat of a recession is growing rapidly, thereby taking the attractiveness out of the stock market.

If you can’t make money at a bank, and you don’t want to throw all your money into the stock market, where shalt thou stash thy cash?

Economics, Finance Fed rate cut, FOMC, interest rate, rates