Today, the Federal Reserve raised key federal funds rate to 4.25%. The Fed also said that the rate hikes may be coming to an end in the near future.

Commercial banks are raising their prime lending rates in lock step with the Fed. The only difference of course, is they are in the "loan sharking" business, not the lending business. For example:

The "prime lending rate" is expected to rise from 7%, to 7.25%. Wait a minute! Interest rates across the board are now where near 7.25%. Why are they charging us 3 percetage points or 70% more for prime when the Fed Funds Rate is 4.25%. Answer: Because they can.

Certain businesses in this country are exempt by law, from certain loan sharking statutes in our country. Here is a quote:

"Banks have separate rules. In fact, due to high inflation, in 1980, the federal government passed a special law which allowed national banks (the ones that have the word "national" or the term "N.A." in their name, and savings banks that are federally chartered) to ignore state usury limits and pegged the rate of interest at a certain number of points above the federal reserve discount rate. In addition, specially chartered organizations like small loan companies and installment plan sellers (like car financing companies) have their own rules".

These exemptions are called usury limits. Here's another quote about usury:

"The usury limit which is stated as the general usury limit is the rate that can be charged by one person or corporation to another, in other words, if you lend your next door neighbor $ 100.00, the rate stated is the limit. To charge more you must get a banking, pawnbroking, or whatever license. This also means that special kinds of loans, like those from pawnbrokers or small loan companies are not stated".

So, the bottom-line here is, certain businesses are allowed to screw you by law, and if you tried to charge an interest rate beyond the legal limit for individuals, you'll go to prison.

Who are the idiots that make these laws. Oh, I know, the same ones who ask for our votes every few years.

To give you a idea of how much you are paying for "prime", here are the latest government rates:

T-Bills:

3-Month 3.91
6-Month 4.33

Notes/Bonds:

2-Year 4.41
3-Year 4.42
5-Year 4.43
10-Year 4.53
30-Year 4.73

Key Rates:

Federal Reserve Target Rate- 4.25/ 1 year ago 2.00

3-Month Libor- 4.49/ 1 year ago 2.49

Prime Rate- 7.00/ 1 year ago 5.00

5-Year AAA
Banking & Finance - 5.04/ 1 year ago 4.10

10-Year AAA
Banking & Finance- 5.36/ 1 year ago 4.92

Mortgages:

15-Year Mortgage- 5.39/ 1 year ago 4.72
30-Year Mortgage- 5.80/ 1 year ago 5.27
1-Year ARM- 4.53/ 1 year ago 3.39