Finance Space

The Federal Reserve has terminated nearly all of the extraordinary lending programs it created in 2007 and 2008 to combat the credit crisis. But it now faces critical decisions in coming months about when and how to tighten monetary policy, according to two Fed officials.

The officials — Brian P. Sack, the executive vice president who oversees the trading desk at Federal Reserve Bank of New York, and Charles L. Evans, president of the Chicago Fed — spoke this week at an economic policy conference here sponsored by the National Association for Business Economics, Sewell Chan reports in The New York Times.

The US central bank has auctioned a further $75bn (?38bn) of short-term loans to help the financial sector.

Offers for $90.88bn-worth of loans from 77 bidders were tabled during the auction, the Federal Reserve said.

The auction, the 15th since December, is part of the Fed’s attempts to help banks through the credit crunch.

Banks have been reluctant to lend to each other since the crisis, sparked by a collapse of the US sub-prime mortgage market, took hold of the market.

Monday’s auction came days after the Fed decided to leave US interest rates on hold at 2% despite signs of falling consumer confidence and continuing problems in the housing market.

Changes in the federal student aid program that took effect Tuesday will lessen interest rates for some students while increasing the amount they can borrow.

Among the biggest changes, the interest rate on new, subsidized Stafford loans to undergraduates drops from 6.8 percent to 6 percent. Subsidized Stafford loans are awarded to lower-income students, and the government picks up interest payments while students are still in school.

The rates are slated to continue to decline in stages over the next five years, part of congressional measures approved last year to increase student aid. Earlier this year, responding to the credit crunch, Congress also approved $2,000-per-year increases in what students can borrow from unsubsidized Stafford loans, which students can take out regardless of income.

A window of opportunity may soon open for owners who have found themselves in trouble because of the mortgages they took out to finance their homes.

As long as you can requalify under today’s more stringent lending standards, you may have a shot to refinance under more favorable terms. Investors who own your mortgage may be willing to cut your interest rate or reduce the balance.

But even if you don’t qualify, they still may allow you to sell the place for less than what you owe.

Countrywide Financial Corp. makes mortgage loans through a vast network of offices, brokers and call centers. But a few customers have gotten their loans a special way: through Countrywide Chief Executive Angelo Mozilo.

These borrowers, known internally as “friends of Angelo” or FoA, include two former CEOs of Fannie Mae, the biggest buyer of Countrywide’s mortgages, say people familiar with the matter.

One was James Johnson, a longtime Democratic Party power and an adviser to Sen. Barack Obama’s campaign, who this past week was named to a panel that is vetting running-mate possibilities for the presumed nominee. Another was Franklin Raines, a onetime Clinton administration budget director, who left Fannie Mae amid an accounting scandal in 2004.

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Todd Coffman thinks he’s a good credit risk — but because he’s studying at a community college, the banks suddenly seem to think otherwise.

Coffman, 28, is halfway through a two-year X-ray-technology degree at Bellevue Community College. In the past year, he took out about $4,500 in federally subsidized student loans through Citibank.

But turbulent credit markets prompted Citibank and other banks in recent weeks to stop offering student loans at many community colleges across the country, including BCC. When Coffman recently put in his paperwork to get next year’s loans, the college told him Citibank was no longer an option. The same thing happened with a second lender. Finally, he obtained a student loan through Wachovia.

CONCERNS about eroding competition in the home loans market will be the focus of a federal inquiry.

The inquiry will examine the state of the banking and non-banking sectors, following concerns over the increasing dominance of the big four banks in the mortgage market, the rising cost of home loans, and the high exit fees levied on consumers who try to switch banks.

The inquiry, to be conducted by the House of Representatives Economics Committee, comes amid concerns that competition could be further eroded with the plan by Westpac to take over the country’s No. 5 bank, St George, and create a $60 billion entity.

MILWAUKEE – Several lenders say they will no longer give loans to students at Wisconsin’s 16 technical colleges and 13 two-year colleges.

The decision reflects a national trend among lenders who say loans to students at two-year colleges are not profitable because students borrow less money for less time and thus pay less interest.

College officials say they have been told Citibank and Chase will no longer offer loans to their students. Two other lenders, TCF Bank and Student Loan Xpress, say they are halting all student loans.

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