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Posted on 11/13/2008 8:09:35 AM PST by BGHater
The United States may need to insure wholesale deposits to ease the credit crisis and restore confidence because the collapse of Lehman Brothers has damaged trust among institutional investors, Barclays said on Thursday.
"What happened in September was the wholesale equivalent of an old fashioned bank run," Laurence Kantor, head of global research at Barclays Capital, told reporters in Singapore.
"The markets are still unwinding the damage from Lehman."
He said the commercial paper market lost $200 billion in two weeks after Lehman collapsed as investors turned to safer government paper, and even after two months private investors are still reluctant to return to the commercial market.
"If you look at the commercial paper market today, it's improved mainly because the Federal Reserve is buying commercial paper," Kantor said. "There is still a dearth of private buying of commercial paper."
Kantor said institutional investors were not willing to leave their money with counterparties, which suggests more measures will be needed to restore confidence.
"In my mind we need some kind of insurance for wholesale depositors, just as we needed insurance for retail depositors," he said, adding investment banks want their commercial obligations to be fulfilled even if the counterparty bank collapses.
Barclays' view comes after two of Wall Street's top dealmakers said the U.S. government's $700 billion bailout is unlikely to be enough, with the financial system needing more than $1 trillion to get through the crisis.
Washington backed away on Wednesday from using the $700 billion fund to cleanse bank balance sheets of bad mortgage debt. U.S. Treasury Secretary Henry Paulson said he preferred instead to focus on buying stakes in banks to encourage them to increase lending.
(Excerpt) Read more at reuters.com ...
Let’s just declare everyone to be rich, fire up the printing presses to run 24/7, and get it over with.
Lol. Please stop, lets not give them any ideas at this point.
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This is madness.
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