Thornburg Mortgage ( TMA) operating chief Larry Goldstone applauds Tuesday's Fed rate cut but says his industry is still facing tough times ahead.

Federal Reserve Chairman Ben Bernanke cut the benchmark fed funds overnight lending interest rate by 50 basis points. The Fed said it feared that disruptions in the credit markets could seep into the economy.

Shares of financial companies rose sharply on the news, as investors breathed a sigh of relief. And Goldstone says he believes the Fed will continue to cut rates through year-end, to 4% from the recent 4.75%.

But Goldstone tells TheStreet.com that even with rate relief, credit worries will persist -- and the housing and mortgage industries are far from out of the woods.

"The moves that the Fed made yesterday was absolutely the right move," Goldstone said in an interview Wednesday. "But at the end of the day, the market is still fairly dysfunctional."

He notes that companies are still having difficulties selling short-term commercial paper, a type of debt financing used by mortgage lenders to help fund loans. Scant few asset-backed and mortgage-backed securities have been structured and sold into the market in recent weeks.

"Mortgage spreads are as wide as they've been, so the Fed cut is not having an impact on mortgage rates per se," Goldstone notes.

If you liked this article you might like

Higher-Quality Loans May Trip Merrill Next

Higher-Quality Loans May Trip Merrill Next

Credit Suisse, GS Eye Green Energy Fund

Credit Suisse, GS Eye Green Energy Fund

Is Buffett Eyeing CIT?

Is Buffett Eyeing CIT?

Bear Trapped: Alternative to Deal Unlikely

Bear Trapped: Alternative to Deal Unlikely

Morgan Stanley Beats Estimates

Morgan Stanley Beats Estimates