No matter how much liquidity the Fed and Treasury pump into the system, they can't seem to get the banks to lend.
(MarketWatch) -- U.S. banks are reducing their lending at the fastest rate on record, tightening the credit squeeze and threatening to leave many otherwise viable businesses unable to borrow money to expand their businesses, meet their payroll or refinance their maturing debts.
According to weekly figures provided by the Federal Reserve, total loans at commercial banks have fallen at a 19% annual rate over the past three months, while loans to businesses have dropped at a 28% annualized pace.
The global financial crisis may morph into a second, equally virulent phase where borrowing costs rise again, hobbling an embryonic economic recovery, debilitating cash-strapped banks, and punishing investors all over again.
It's pouring money. Today the Federal Reserve committed $800 Billion more:
The Federal Reserve took two new steps to unfreeze credit for homebuyers, consumers and small businesses, committing up to $800 billion.
The central bank will purchase as much as $600 billion in debt issued or backed by government-chartered housing-finance companies. It will also set up a program of $200 billion to support consumer and small-business loans, the Fed said in statements today in Washington.
$200B is partially aimed at credit card debt. They want consumers to use more credit cards.
Great! Nothing on predatory lending, excessive fees...
yet another $800 Billion, just like that.
The U.S. government is prepared to lend more than $7.76 trillion on behalf of American taxpayers, or half the value of everything produced in the nation last year, to rescue the financial system since the credit markets seized up 15 months ago.
So to whom is all of that money going? The Federal Reserve still won't tell!
They have already given $2.8 trillion dollars.
This blog title Shock and Awe took the words right out of my mouth on how incredible this is.
The credit crisis is spilling into the world food supply. People will go hungry.
The credit crisis is spilling over into the grain industry as international buyers find themselves unable to come up with payment, forcing sellers to shoulder often substantial losses.
It's almost 3am here in Chicago, and the S&P futures are down 9 points, while the Dow is down almost 60, not to mention the NASDAQ 100 being down almost 10. Now perhaps this is simply profit-taking from those two monster rallies last week. But from what I'm hearing, this plan by Paulson isn't a sure fire pass. There seems to be some resistance forming, and I think The Street smells a fight coming.
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