THURSDAY FEBRUARY 18, 2010

SURPRISE!

Wow, the Federal reserve surprised the markets after the close today by raising the Fed's discount rate to .75% from .50%.  The Fed cited the "normalization" of the Fed's lending facilities.

While the market is likely to react negatively to this, I think this is a good thing.  It is a vote of confidence on the economy.  It tells us that the Fed has confidence in the economic recovery and the banking system.  And this is a symbolic change, as the rate increase will have little effect mortgage rates or consumer loans and corporate earnings.  After all, whether rates are .75% or .50%, they are and will remain historically low for an "extended" period.

POSTED AT 1899-12-30 16:34:00.0

KEN ENTENMANN, CFA
SENIOR VICE PRESIDENT AND
THE DIRECTOR OF INVESTMENT MANAGEMENT SERVICES

Ken is a Senior Vice President and the Director of the Trust and Investment Services at Alliance Bank, N.A. He has 23 years of investment experience and oversees the management of assets totaling $1 billion. He holds a B.S. in Applied Economics and Business Management from Cornell University and an M.B.A. from the William E. Simon Graduate School of Business Administration at the University of Rochester. He has also earned his Chartered Financial Analyst designation. He is a member of the Executive Committee of the Trust Division of the New York Banker's Association. He is also a director of the Central New York Community Foundation.

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