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Dec. 18 (Bloomberg) -- Money market rates tumbled after the European Central Bank injected an unprecedented $500 billion into the banking system as part of a global effort to ease gridlock in the credit market.
"These are strong-arm tactics intended to show the market they're seriously committed to breaking the deadlock,'' ..." The ECB is helping to bankroll banks out of a problem that they themselves created."
The decline may signal that policy makers, in their first coordinated action ...are making headway in reviving lending between banks.
The central bank measures have had mixed results.
The ECB action "doesn't address the fundamental issues of banks hoarding cash and while the central bank has succeeded in stabilizing the shorter-term rates, it makes little impact on the longer-term rates,'' ...
The US economy is in the danger zone. GDP growth in the fourth quarter of 2007 (0.0pc) and first half of 2008 (0.8pc in the first quarter and 1.8pc in the second quarter) is expected to be very weak.
Morgan Stanley's Asia Chairman, Stephen Roach, made this observation in a New York Times op-ed on Sunday: This recession will be deeper than the shallow contraction earlier in this decade. The dot-com-led downturn was set off by a collapse in business capital spending, which at its peak in 2000 accounted for only 13 percent of the country's gross domestic product. The current recession is all about the coming capitulation of the American consumer - whose spending now accounts for a record 72 percent of G.D.P.
Unfortunately, the Fed bailout has achieved nothing. Libor rates---which are presently at seven-year highs---have not come down at all. This is causing growing concern among the leaders of the Central Banks around the world, but there's really nothing they can do about it. The banks are hoarding cash to meet their capital requirements. They are trying to compensate for the loss of value to their (mortgage-backed) assets by increasing their reserves. At the same time, the system is clogged with trillions of dollars of bad paper which has brought lending to a halt. The huge injections of liquidity from the Fed have done nothing to improve lending or lower interbank rates. It's been a flop. The market is driving interest rates now. If the situation persists, the stock market will crash.
NEW YORK (CNNMoney.com) -- The Federal Reserve announced Wednesday that it was lending $20 billion to banks in the first of four special auctions designed to help alleviate the credit crunch on Wall Street
Originally posted by Vitchilo
Only half a trillion? HAHAHA, the housing market is worth 150+ trillions... 2008-2009 will be awful, it will reboot the entire world economy, destroy the US dollar so foreign investors can buy every infrastructure like in a third world country.
Dec. 20 (Bloomberg) -- Bear Stearns Cos., the securities firm that helped trigger the collapse of the subprime market, reported its first-ever loss after writedowns for mortgage holdings and declines in trading and investment banking.
The fourth-quarter loss of $854 million, or $6.90 a share, was almost four times wider than the average estimate of analysts surveyed by Bloomberg. Bear Stearns fell as much as 2.9 percent in New York Stock Exchange composite trading
The company's writedown, while smaller than at Citigroup Inc., Morgan Stanley and Merrill Lynch & Co., adds to the more than $80 billion of charges reported by the biggest banks and securities firms since surging defaults on U.S. subprime mortgages prompted investors to shun high-risk, high-yield debt.