Another Federal Reserve interest rate cut is expected today, the second in as many weeks. Officials are trying everything they can to prop up the economy and avoid a recession, which leaves little doubt rates will be cut — the only question is will they cut the key federal funds rate by another quarter or half a percentage point?

Either way, here’s what it means for you in the short-term: better rates to come for those who are eligible to refinance long-term debt such as mortgages, better terms for those looking to buy that new crib and a good chance to ask for a lower rate on your credit card.

What won’t be known for months is whether the lower rates will get consumers and companies spending enough to fight off a recession.

What do you think lower rates will mean for you?

As expected, Dubya dove right in on the economy in his last State of the Union speech. But from talking to most of my friends last night, I may have been the only black person in America watching (most people I know boycotted. One had this as her status message on gmail: State of the Union — a disaster. Mr. Bush, please leave office immediately).

That about sums up how most folks I know feel about the 43rd prez, but either way he did put some ideas on the table regarding the economy:

“To build a stronger economy, we must trust people with their own money.”

Translation: I need this economic stimulus plan to pass so the government can hand out checks to everybody and hopefully you’ll all go out and spend it right away. (Nevermind that I’ve been spending it all and then some on two wars for a few years now.)

To show he trusts us with our own money, Dubya wants a few things from Congress, notably making his tax cuts permanent and a plan to issue tax-free bonds, the proceeds from which would go toward funding mortgage refinancing (this I found really peculiar since risky mortgages that were packaged together and sold to investors as bonds are a HUGE part of what weakened the economy to begin with).

But really, what Bush wants for the economy might be of little consequence. He’s a lame-duck president with Congress controlled by the other party and even candidates in his own party distancing themselves from him. It’s unlikely he’ll get much of what he asked for, save for maybe the tax-rebate stimulus plan.

So here’s a more important question: What do you think would work best to turn the economy around? Let us know in the comments section.

People sometimes forget that the subprime mortgage/home foreclosure mess is about more than a possible recession and who got fired on Wall Street (although one of the biggest firings was Stan O’Neill, a black man who had been CEO of Morgan Stanley and got a $161 million golden parachute to leave).

60 Minutes broke it down and put a face on it. They featured a black couple from California who got talked into a subprime mortgage on a $436,000 crib knowing full well they couldn’t afford more than a $2,500 mortgage payment. The interview went like this:

“Did you understand what was going on? Not really.

Did you have a lawyer look at it? No i didn’t.

But you knew this was a big decision….you were borrowing hundreds of thousands of dollars… I didn’t really look at it like that.”

I hate to see the trauma that being thrown out of a house causes anybody, but answers like that make it hard to feel too sorry for some people. If you wouldn’t buy a car without understanding how the note was going to work, why’s a house be any different? A little common sense might have saved a lot of pain in the long run.

In any event, you can watch the entire 60 minutes piece here.

After about a week of talk, Congress and the Bush administration finally made a deal on tax rebates that they hope will help the economy by getting you spending again. If you haven’t heard by now, the deal is that the government will start giving out tax rebates in May:

• single people who pay income tax will get up to $600
• couples up to $1,200
• people with kids get an additional $300 per kid
• those who work but don’t make enough to pay taxes will get $300.  

It’s all supposed to cost the government about $150 million counting some other tax breaks for businesses.

I spent my afternoon yesterday interviewing and debating with economists and regular people about whether this will help avoid a recession and the general feeling was that it’s not enough:

“It’s like a little pacifier. We’re going to give them this and hopefully we’re going to buy again. For a single person like me, who’s not married, no kids or anything, I still get railroaded with taxes more than people with families.”

That’s what Lynnette Reid-Hinds, a sista in Cincinnati thought about it. The chief investment officer of a big money management firm said the plan was a good start but it’d take more to turn the economy completely around.

But never-mind the debate. It looks like most people probably have cash coming to them, so the real question is what to do with it?

The other day Huntington Bank sent me a press release with these tips for consumers. They’re mostly related to the Fed’s interest rate cut the other day, but they’ve got some relevance to what you may want to do with any cash you get back:

 1.  Lock in a Lower Rate on Your Mortgage Long-term fixed mortgage rates have been coming down and may come down further following today’s action by the Fed. So if you have a variable interest rate on your mortgage, you might take the next few weeks to see if you can get a better fixed rate. Locking in that low rate provides an affordable payment over the life of the loan.

2. Adjust Home Equity Lines of Credit
Rates on home equity lines of credit will also be reduced.
Start checking with your bank and online sources for the rate adjustments, which should settle in by end of the week.
Be sure to consider the terms and any additional fees.

3. Make the Most of Your Savings and CDs Savings and CD rates will likely be inversely affected by the Fed rate cut, but online options may be better now.
Huntington Bank offers its Huntington Direct product, and you should start with your bank’s web site before looking into other options. As always, be careful shopping online.
Don’t just jump at the highest rate; look at all fees and conditions involved.

4. Save on Student Loans
While the rate cut won’t directly affect student loans in the short term, it could still save you money if you have a college student in the family. The drop could make home equity or other vehicles more advantageous than the student loan rates.

5. Consolidate Credit Card Debt, Refinance Auto Loans Think about consolidating high rate credit card debt or other installment loans. Options may include a lower-rate home equity loan, or installment loan. Before you make your move, though, make sure you understand all the aspects and obligations with a home equity or personal credit line tied to your home. 

25 percent: That’s how much the investment bank Merrill Lynch thinks home prices are going to fall in the next two years. And that ain’t counting 2010, when they could drop even more:

“By our calculations, it will take about a 20 to 30 percent decline in home prices to correct this imbalance,” CNNMoney.com quoted the report saying.
If you read my post from yesterday (and you should have), you’ll remember that I said the weakness in the housing market along with lower interest rates (right now, rates on 30-year fixed mortgages are lower than they’ve been since ‘05) should be great news for anybody shopping for a crib. But a 25 percent overall drop in prices? I think I’ll start my home shopping now.

If you’re selling though, no such luck. 25 percent is also the number of homeowners who one mortgage broker thinks will be eligible to refinance their mortgages. That leaves a lot of people stuck with higher rates, either because their houses are worth less now than they owe (there go those falling prices again) or because their credit isn’t good enough to qualify for a refinancing.

We all know there’s little chance the housing market will turn around quickly. Folk with adjustable rate mortgages and falling home values won’t get a reprieve, even with the Fed lowering interest rates yesterday.

But that means it’ll probably be a buyer’s market for a while, especially if you have good enough credit to take advantage of the best rates after the Fed’s action. And that’s good news, particularly for youngins who are renters looking to get into their first place:

“The ideal home buyer now — in a reverse of what was true for years — is a renter who is not burdened with a house. Such a buyer will need a down payment from somewhere, and he or she will need enough income to meet the monthly payments for the foreseeable future, including any increase in adjustable rates that seems probable.

But not owning a home, which may be hard to sell, is a big plus.”

That’s from a New York Times article on Jan. 18, a full five days before the fed lowered rates. If it was a good environment for buyers then, wait till the offers on mortgages catch up with the federal funds rate, the key rate that was lowered by 0.75 percent. (It’s not a guarantee, though, that mortgage rates will automatically come down because the fed funds rate is a short-term rate and mortgages are long-term loans that aren’t necessarily tied to it).

Either way, if you’re a renter with good credit, some cash put away and looking for a place, today’s a better day than maybe any over the past five years.

It ain’t looking good. The Fed — otherwise known as a group of white guys who decide how many points we all pay to borrow money — cut interest rates by three-quarters of a percent today. Sounds like good news, but not necessarily — or at least not right now.

I talked to a few economists this morning and here’s what it could means for your pockets:

1) If you’re stuck in an adjustable-rate mortgage (ARM, lower rates could help, but don’t count on it — especially not immediately. Most ARMs reset only at a certain time, like every six months or every year, so you’ll have to wait til yours resets to see if you can bring that payment down.

‘Course if you’re already underwater on your mortgage — meaning you owe more for the house than it’s worth — or if your credit score is too low, lower rates won’t do you any good. You still won’t be able to refinance.

2) If you’re a business owner, this could be good news. Interest accrues quickly on many business loans, but a lot of them also calculate that interest daily based on what the current rate is. If your rate is tied to the Federal Funds Rate, which the Fed lowered, you might benefit.

3) If you’re just a consumer looking for a loan or new credit card, whether this helps will be pretty nuanced. It’s been more difficult to borrow the last several months, especially for purchases like homes. Banks are still looking very closely at loan applications carefully and you need a pretty high credit score to borrow enough for major purchases these days. If you do have a great score, you’ll probably see lower rates than in the past several months.

In a lot of places MLK Day is typified by a day off from work and school and big breakfasts with a lot of people in suits speechifying. But I noticed this year that that a lot of MLK Day celebrations have had an economic empowerment theme.

A Florida community college, a Tulsa church, a formal dinner in Chicago: all of them MLK programs with keynote speakers who focused strictly or partially on economic themes. Hopefully they’ll help bridge the gap between  younger generations, whose primary concerns are more about economics than they are the right to travel, socialize or work freely, and older ones who remember a more “traditional” civil rights agenda and tactics.

It’s pretty hard to argue tat the two are in conflict though; you don’t hear about it much in what passes for coverage of civil rights leadership these days, but much of the work of Dr. King and others had as much to do with the economic stability of black folk as it did with any other theme. King himself died as he much of his focus was shifting to rights and conditions for poor people.

So maybe a more fitting, or at least up to date way to celebrate Dr. King’s  life would be to go back in your email, find all the spam asking you to take a day and not spend any money or something like that and put ‘em to use. Or you could just teach a kid that that nice house mommy and daddy bought really did have something to do with those people singing and marching in the old news clips.

What would you do with an extra few hundred?

You may be about to find out since the Bush administration is looking to give out tax rebates to help keep the economy from slipping into recession.

I’m no better than the next guy, so I’d love to have the extra three yards in my pocket. But will it turn the economy around? Probably not.

Better yet, here’s the answer I got from an economist I asked today: “It’s like p*ssing in the wind.” In other words, giving people a few extra bucks to blow one month, and then sending them back to the same ol’ same ol’ is hardly enough to get businesses hiring or banks lending again and to keep the economy afloat.

Remember in 2001, we all got a few coins back from the government for the same reason, but there was still a recession. That doesn’t mean the same thing will happen this time.

But just in case,  if they do give out rebates this year, I’ll be saving mine for a rainy day.

The big campaign news this week was all about race and gender and the identity politics between Barack and Hillary. But if you paid too much attention to that, you probably missed Hills, Barack-star and John Edwards threaten to break out into an actual debate over their economic policies on Tuesday night in Vegas.

It started with Hillary noting that the debate was sponsored by black and Hispanic groups but that no one was talking about the economic issues that affect us, particularly that home foreclosures hit our neighborhoods harder than whites’. (The NYTimes did a good piece on foreclosures among Black women here.) She wants a $30 billion fund that states could tap to fight foreclosures and a five-year freeze on interest rates, though she didn’t get more specific on how that would work (and how in the world you’d get banks to agree to it).

Barack came back with his own proposal: repeal the Bush tax cuts, which he said help rich folks keep their cash while hurting the middle class. He’d exempt the middle class from increases in taxes on capital gains and dividends as a way to encourage workers to keep investing and saving. If you make less than $70 grand a year, he wants to cut your tax bill by $1,000 annually. He wants to require mortgage lenders to provide full disclosure of the terms of their loans to borrowers. Finally, if the Senator from Illinois becomes President of the United States, he wants a homeowners mortgage deduction savings tax credit that would give a break to people who own their houses but don’t itemize stuff like maintenance costs when they file.

*(Um, isn’t this the same cat people accuse of being vague on his positions? Sounded pretty specific to me.)*

Edwards said he regretted voting for a bankruptcy bill in 2001 that would have made it more difficult for individuals to file (it failed anyway but a new one passed in2005). He said he wants to raise the federal minimum wage to $9.50 an hour and set up a formula where it would automatically go up based on what was happening in the economy. He also wants student loan reform, but wasn’t specific about what kind.

I liked that all three of them were specific about what they wanted to do for the economy and about issues that affected black folks’ pockets. But I’d be interested in knowing what you all think would be the proposal that would do you the most good, and whether any of those things will sway who you vote for.