Bond Fund Manager Wants Fed to Lower Rate

Bill Gross, manager of the world's biggest bond fund, said the Federal reserve should lower the rate it charges banks for direct loans by a greater amount than it cuts the overnight rate when policymakers meet next week. He says he is hopeful for a 50-basis-point cut of the discount rate. Lending between banks will be assisted by cutting the discount rate to a level where there is potential to make money by going to the discount window and lending money at the London Interbank Offered Rate for a three-month contract. At 5 percent, the discount rate is half a percentage point more than the Fed's target for overnight loans between banks. The central bank has lowered the discount rate three times since August as a contraction in credit markets drove up bank's funding costs.