Thread: 'They're throwing billions around but things get worse'

'They're throwing billions around but things seem to be getting worse'

• Central banks in desperate bid to stop system collapse
• Interbank lending markets plunged into more turmoil

Ashley Seager The Guardian, Tuesday September 30 2008

World central banks desperately tried to stave off collapse of the global banking system yesterday with large cash injections into money markets buckling amid news of another rash of bank failures.

The pound also suffered its biggest one-day fall since mid-1993 against the dollar as dealers focused on the fact that the US government looked as if it was going to approve its $700bn (£389bn) bail-out for US banks while the UK banking system suddenly seemed shakier than before. Sterling fell 2.3% to below $1.80 at one point. The dollar fell in late trading after the US House of Representatives voted against the bail-out plan.

Mark Deans, dealing manager at Moneycorp, said: "Confidence in UK banking has fallen to a new low with the nationalisation of Bradford & Bingley. This has prompted a major sterling sell-off and, coupled with growing confidence that the US government's Wall Street bail-out may be agreed, it has resulted in the pound's heavy fall against the dollar."

Analysts said confidence in the pound was shaken because there was still little sign that the Bank of England intended cutting interest rates to shore up an increasingly fragile economy.

Interbank lending markets across the world were plunged into further turmoil after the weekend collapse of Bradford & Bingley and Belgium's Fortis, which meant other banks remained reluctant to lend to one another. The Bank of England made an injection of £40bn of three-month funding. But that was later trumped by the US Federal Reserve which, in conjunction with the BoE and other central banks, increased its reciprocal dollar fund swap arrangements to $620bn (£344bn) - more than double the previous amount.

"They are throwing billions around, but things seem to be getting worse. They are throwing everything they can at the problem but nothing seems to be working," said Joe Saluzzi of Themis Trading in New Jersey. "There's a monster amount of fear out there. This is global contagion - it's no longer just the United States."

The daily fixing of London interbank offered rate (Libor) by the British Bankers' Association showed three-month sterling rates rose to 6.26% from 6.25% even further above the Bank's official rate of 5%.

The three-month dollar Libor fixing was up at 3.88% compared to 3.76% on Friday while three-month euro funds went up to 5.22% from 5.14% at the end of last week.

The separate Euribor fixing for euros rose to a record of 5.24%, a rise of 10 basis points, which was the biggest jump since June. The premium for borrowing euros over the expected official bank rate three months later widened to a record high of 220 basis points.

"The root of the banking story is in the money markets, which are still in awful shape," said Padhraic Garvey, a strategist at ING Bank. "Banks are dealing with central banks for liquidity purposes but are very careful about dealing with one another in this environment, which effectively means the interbank wholesale-money market is not working."

The BoE's auction of £40bn of three-month money was oversubscribed by 1.3 times, such was the demand for funds. The increases in interbank rates show central bank attempts to breathe life back into money markets have failed.

The European Central Bank said it would make additional funds available to banks through the end of the year in "special" auctions.

The central banks of Japan and Australia added more than $20bn to money markets.

The BoE said yesterday it would also offer $10bn in an overnight money market operation.

http://www.guardian.co.uk/business/2008 ... wallstreet

Sounds to me like the global banking system SHOULD collapse, if it takes American taxpayer money to keep it afloat. All those Globalist bankers can go to hell. They built their house of cards for example by supporting home loans to illegal aliens and accepting the matricular consular, let them suffer the losses. In fact why not tax the multimillionaires and billionaires in the US and Mexico to pay for the bailout.