why are ARMS sky high? (credit, mortgage)

[SamNC]

I am curious why the ARM rates are sky high. If they are tied into COFI or LIBOR, and those are at about 3% now, how high can the ARM mortgage possibly be?

I was seriously considering getting an ARM back in 2004, but after several bankers tried to explain the ARM rates to me, I was totally confused and just went with a fixed...but I am curious how they can possibly get so high if the rate they are tied into is so low.

[HappyTexan]

Credit is tight so rates are high. The fed cuts will not trickle to consumer rates.

The initial rate is a teaser rate.