Short-term credit is drying up as banks hoard cash to save their own skins. Inter-bank lending rates (the LIBOR and EURIBOR) are at historic
highs--meaning the cost of short-term loans between banks has become exorbitant, if the money will be lent at all.
In turn, companies and state and local governments cannot meet their short-term obligations--the proverbial cash-flow crisis, but on a global
scale.
This is the next domino falling in the financial crisis, and is extremely worrying. Short-term loans such as these are the grease that keeps the
economic engine running, and if these lending markets collapse, well--let's not go there.
So the FED will be lending directly to S&L governments and large companies as lender of last resort to stave off an even greater crisis of widespread
defaults and bankruptcies.
www.bloomberg.com
(visit the link for the full news article)
Money-Market Rates Climb as Banks Hoard Cash, Crisis Deepens
(Bloomberg)
[edit on 6-10-2008 by gottago]
Fed May See Lending to Companies, States as Next Crisis Fronts , page 1
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Topic started on 6-10-2008 @ 07:00 AM by gottago
www.bloomberg.com
Fed May See Lending to Companies, States as Next Crisis Fronts
www.bloomberg.com
Federal Reserve Chairman Ben S. Bernanke may find the next fronts of the financial crisis to be just as chilling as last month's downfall of Wall Street titans: its spread to corporate America and state and local governments.(visit the link for the full news article)
Companies from Goodyear Tire & Rubber Co. and Duke Energy Corp. to Gannett Co. and Caterpillar Inc. are being forced to tap emergency credit lines or pay more to borrow as investors flee even firms with few links to the subprime-mortgage debacle. California Governor Arnold Schwarzenegger says his and other states may need emergency federal loans as funding dries up.
A cash crunch on Main Street would endanger companies' basic functions -- paying suppliers, making payrolls and rolling over debt.
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