Yesterday was an ugly day on Wall Street, and in financial markets worldwide. Lehman Brothers collapsed and filed for bankruptcy protection, Merrill Lynch worked out a sale agreement with Bank of America, AIG stock plunged as their cash crisis mounts, Goldman Sachs plunges 70%, and Washington Mutual’s stock was dropped to junk status.

In order to combat the meltdown in our financial markets, The Federal Reserve is attempting to navigate whether the overnight Fed Funds Rate should be decreased or hold steady. As we reported about two weeks ago, Chairwoman Sheila Bair of the FDIC reported 117 banks on her “problem list”. After yesterday’s debacle in the financial markets, banks are hoarding cash, driving up the short term interest rates, in an attempt to shield themselves from failure. In June, the overnight dollar rate was 2.07%, closely correlating to the 2% Fed Funds rate. Monday night, it soared to 6.44%. Central banks pumped in over $210 billion as they sought to counterbalance the fear. The European Central Bank, Bank of England, Bank of Japan and the Reserve Bank of Australia all injected billions of dollars into the American financial markets in an attempt to halt the worsening global financial crisis.

The good news is it is expected that the the Federal Reserve will cut interest rates today by a quarter point. The announcement will come at 2:15PM Eastern Time. That’s good news for buyers and for homeowner’s who want to refinance. Rates have dropped almost a point since the Government took control of Fannie Mae and Freddie Mac. With another quarter point potentially trickling into rates, the cost associated with refinancing to a lower rate mortgage will save money for homeowners who plan to be in their house for at least another 3 years.