the problem is short term paper, yes???
Posted on 09/28/2008 2:44:22 AM PDT by TigerLikesRooster
Need for action on the banking panic
Published: September 25 2008 18:10 | Last updated: September 25 2008 18:10
Banks are not to be trusted. This is not just the view of the public and policymakers, but that of the banks themselves. Spreads on unsecured inter-bank lending have reached unprecedented levels, particularly in dollars and, to a lesser degree, sterling. Such stresses cannot continue for long, without serious damage to both the financial system and the economy. Something has to be done. The question is: what?
Thursday’s spread over one month between the London interbank offered rate and future expected policy rates was close to 200 basis points for dollar loans and 120 basis points for sterling ones. In the case of dollar loans, the spread was nearly twice as high as at any point since the crisis began in August 2007. Market stress has evidently reached frightening levels.
If lenders demand huge spreads for such short periods, they are either tightly constrained in their ability to lend, deeply concerned about the solvency of counterparties, or engaged in predatory behaviour. Whichever of these possibilities is true, credit to the economy will dry up. If banks do not trust banks, what do they trust? The answer is: only the government.
(Excerpt) Read more at ft.com ...
Ping!
Easy solution..Run the banks.
They trust, they just want higher rates/fees.
Though we are going to feel the effects of this for some time, the rest of the world is getting its noses bloodied right now. They already are fearful of runs on their banks, and France's GDP and national debt service has them in trouble with the EU's planned economic control, which they richly deserve.
All that most American's seem to focus on is to "SUPER-SIZE" their spending practices, and buy way more than they can ever pay for. And they then sell their votes and souls to anyone who will promise them that they were taken advantage of.
Throw a few of the them on the streets and let them see what reality is like for a change. "MY BAD", some federal activist judge will let them stay on the dole like all those KATRINA evacuees who still are without jobs as they were ten years ago when they went on government assistance.
Gag me with a back-hoe.
Europe has a huge mess, currently overshadowed by noisy chaos in U.S.. If U.S. economy goes down, theirs will be literally flattened far worse than U.S.
This was caused by people, from both the government and the private sector, who are involved in financial malfeasance. The first step of any solution to this problem is to rid both the government and the private sector of those people, and their practices, from participating any further.
Giving them additional money is the worst thing to do.
This past Sunday on one of the morning shows Paulson said, ""If we design it so it's punitive and institutions aren't going to participate, this won't work the way we need it to work," Paulson said. "Let's talk executive salaries: There have been excesses there. I agree with the American people. Pay should be for performance, not for failure. We've got work to do in that regard. We need to do that work. But we need this system to work. And so reforms need to come afterwards."
Under what conditions could they refuse the "bailout" if they are in such dire straits? If the future of the nation on the line how could they NOT consider giving up potential millions in pay and bonuses to save the nation?
My contention is that they will survive without any help. They see the teat swelling and are just eager to latch on.
EXACTLY!
the problem is short term paper, yes???
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