The short answer is no. The long answer is yes.

If you’re an active home buyer right now, you might’ve cheered the news that interest rates dropped yesterday by ¾%. Actually, what got dropped was the interest rate the federal government charges banks when it loans them money – not you and me. Bummer.

The stock market was thrilled however, and shot up over 400 points.

Why was Wall Street thrilled? What’s that got to do with you and me anyway?

The Fed is trying to get money circulating again (see yesterday’s post “A layman’s guide to the Bear Stearns collapse”). Most of the money that goes to you and me for our home loans ultimately comes from Wall Street. You may get your loan from WaMu, Countrywide, B of A, etc, but they turn around and sell your loan to any number of secondary market buyers (Freddie Mac, Fannie Mae, etc), so that they can get that cash back they loaned to you so they can repeat the process all over again.

Meanwhile, that secondary lender bundles all those loans together and tries to sell them to “investors”. Who are those investors? The global economy. Pension plans. Insurance companies. Organizations that want a safe, secure, steady, source of reliable income streams.

But what if those “investors” are spooked and don’t want to buy those pools of mortgages? Then the secondary lenders are out the cash they paid for those loans (yes, they’re receiving the income streams) and don’t have any cash to buy new loans made by the loan originators.

That’s the problem we’re having today. A crisis of confidence. The fast, cheap, and ultimately worthless sub-prime loans made by the truck load to (historically) unqualified home buyers has mucked up everything.

And investors don’t want anything to do with mortgage backed securities because they simply don’t trust ‘em. Investors have been burned.

But – in the long run, if the Fed can get the wheels greased up again and turning again, these rate cuts should help you and me.