"The Worst Monetary Crisis In 20 Years," Warn Banks

News Type: Event — Seeded on Mon Sep 10, 2007 7:38 AM EDT

Article Source: The Times

world-news, money, market, banking, bank, crisis, loan, world-bank, risk, sub-prime, monetary, usa-rank

LEADING bankers are warning of the worst crisis in the money markets for 20 years, which will come to a head this week when $113 billion (£57 billion) of commercial paper – market IOUs – comes up for refinancing.

This huge refinancing, mainly through London, exceeds the $100 billion that became due in mid-August, and which sparked the most serious phase in the money-market crisis, which has seen banks scrambling for funds and market interest rates rising sharply. "This is a serious pressure point," said one leading banker.

Another senior executive of one of Britain's top five retail banks said: "These are the worst conditions I have seen in money markets for 20 years".

The huge amount of commercial paper becoming due is the hangover from the crisis in credit markets that began with American sub-prime mortgages. Many of the off-balance-sheet structured investment vehicles (SIVs) set up by the banks were borrowed in the form of asset-backed commercial paper.

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Killfile

The sub-prime mortgage implosion may be the single best test since the stagflation of the 1970s for the overall effectiveness of the central bank. Here's hoping.

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#1 - Mon Sep 10, 2007 7:50 AM EDT

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"The Worst Monetary Crisis In 20 Years," Warn Banks

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