NEW YORK (Fortune) -- There are two things you may have heard about the Federal Reserve Board, both of which are wrong.

The first is that the Fed controls U.S. interest rates.

The second is that the Fed has made so many commitments that it's in danger of running out of cash or Treasury securities. Which would mean it couldn't carry out its declared policy of putting cash into the world financial system or its undeclared policy of keeping institutions that it deems worthy afloat. Let me show you why both of these beliefs are myths, not reality.

Let's do interest rates first. It's the more common myth, created partly by sloppiness among people in my business who write (and say) things like, "The Fed cut interest rates today."

In fact, we should always insert "short-term" before "interest rates" when we talk about the Fed's control. That because the Fed controls only some short-term rates, primarily the so-called Federal funds rate that financial institutions charge each other for overnight loans. The financial markets set long-term rates, which often don't move in the same direction as the Fed funds rate.

The case in point: the relationship - or lack of one - between the Fed funds rate and the interest rate on long-term mortgages.

Since September, the Fed has reduced the Fed funds rate by 62% - to 2% from the previous 5.25%. But long-term mortgage rates are higher than on Sept. 18, when the Fed began its rate cuts, as you can see from the adjacent graphic, which is based on numbers from mortgage experts HSH Associates.

The rate on a 30-year fixed-rate conforming mortgage - "conforming" means that the mortgage is eligible for sale to mortgage guarantors Fannie Mae (FNM, Fortune 500) or Freddie Mac (FRE, Fortune 500) - was 6.44% the week before the Fed's first cut, and was recently 6.51%. Jumbo mortgages - mortgages too big to be considered conforming - were going for 7.63%, up from 7.26%. (All of these numbers include up-front points that borrowers pay, in addition to their basic interest rate.)

The Fed and Treasury - along with many of the world's big financial players - would love to have U.S. mortgage rates decline, because that would lend support to home prices, which could use it.

Falling home values - what we have in most U.S. housing markets - increase foreclosures, which increase borrowers' pain and lenders' losses. The declining value of houses as collateral for mortgages makes mortgage lenders less eager to lend, and makes potential home purchasers far less eager to buy. It's a vicious cycle that will end sooner or later - everything does - but it's not something that the Fed (or any individual regulator or player) can control.

The Fed cut short-term rates to help mitigate the panics that have been sweeping the world financial markets for more than a year. In addition, those lower rates - in theory, at least - help prop up the U.S. economy.

But you can also argue that the Fed's lowering of short-term rates has raised inflation fears and contributed to the decline of the dollar in international markets, which in turn has affected commodities prices, whose massive increases are a major factor in U.S. inflation. So repeat after me: the Fed can set only short-term rates. Which may contribute to having long-term rates act in ways that the Fed didn't intend, and doesn't particularly like.

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(Excerpt from CNNMoney.com - "Two Fed myths that need debunking")