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Message: <blockquote data-quote="Samuel" data-source="post: 2133093" data-attributes="member: 104363"><p>Basically, big banks such as Bank of America, goldman sachs, AIG all borrow money from the government at a certain interest rate. They use this capital to give out loans to corporations, and to other banks that offer mortgages, student loans, and other personal loans. Essentially, the fed decides on an interest rate it provides to big banks, and those banks pass those interest rates onto their customers (people and businesses). In a recession, the fed lowers the interest rates. Lower interest rates means that people can borrow more. Credit becomes more fluid. Instead of saving money, business are able to borrow money to expand their businesses, hire more people, etc. the economy grows. In boom times, the fed. raises interest rates to prevent security bubbles and to slow inflation.</p></blockquote><p></p>