Subprime's Salvation Is Fed's Conundrum

The hedge fund Farallon rescued Accredited Home Lending(LEND Quote) Tuesday but may have blown up some bulls' rate cut thesis in the process.

Why would subprime lenders need an injection of new liquidity from the Federal Reserve when there's enough out there to facilitate a hedge fund rescuing a subprime lender? The Fed is unlikely to cut the fed funds rate or change its bias at the conclusion of Wednesday's Federal Open Market Committee meeting because evidence of loose liquidity is still abundant in today's financial marketplace -- even with the subprime problems and house price deflation and, yes, even with slower economic growth.

But a Fed that stays on hold doesn't preclude the usual "Bernanke bump." Indeed, Todd Leone, head of listed trading at Cowen & Co., says the stock market's strength over the past couple of days is partially due to anticipation of Federal Reserve Chairman Ben Bernanke's effect. ...