With the federal-funds rate and the discount rate dropping only a quarter percentage point apiece, many people close to the industry are grimacing at Federal Reserve Chairman Ben Bernanke for his lack of compassion during the holiday season.

Well… at least Barron’s Randall Forsyth is, saying “that fellow with the beard” could have done a lot more for the bruised US economy.

He notes that the markets were looking for a much more “aggressive” handling of the discount rate, which is known as the rate the central bank charges for direct loans to depository institutions.

With the credit crunch seeping into nearly every nook and cranny of the US financial system, Forsyth believes that a more focused approach to the discount rate might have begun to pave the way towards some kind of recovery, at least for some.

For him, a larger discount rate may have potentially resulted in borrowers further understanding that the Fed really is the last resort lender. Furthermore, more and more borrowers could take advantage of loans that are currently unavailable without the discount rate cut, since many banks are growing more and more careful about who they lend money to.

And the European market isn’t really doing any better. Speaking with regards to the severe problems surrounding Eurodollar futures prices, RBS Greenwich government bond strategist David Ader noted, “If the Fed’s objective in easing an additional 25 basis points’ was to secure ample credit and no liquidity crunch into the year-end, today’s price auction would suggest that these efforts were unsuccessful.”

Bernanke’s current approval ratings aren’t necessarily dependant on what the moves do for people’s respective institutions. For Wells Fargo chairman Richard Kovacavich, whose company’s shares dropped 5.7 percent following the FOMC announcement, the rate cute was the appropriate choice.

Playing into all of this was yesterday’s announcement that Central Banks worldwide were changing the way they lend money to banks in an effort to help ease some of the problems surrounding the international credit market. It was reported that the Federal Reserve, the Bank of Canada, the European Central Bank, the Bank of England and the Swiss National Bank agreed to increase the amount of capital they lend out to banks, sending indexes worldwide soaring as a result of the news.

The Fed openly stated that the move was a response to the currently weak state of the economy at large and was not a reflection of the needs of any one particular bank.

“This is not about particular financial institutions with particular problems,” a senior Fed official noted. “It is about market functioning.”

“We have a Fed now that seems to understand the liquidity problem of the marketplace,” added William H. Gross, the chief investment officer of Pimco. “These measures while limited in size and with limitations in acceptance of collateral should certainly instill a measure of confidence to the private market.”

Currently, the Fed’s plan is to auction $40 billion in loans to banks, at two auctions that are coming up this month, and at two more that are scheduled for January.

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