Talk about a funding crisis. I just realized I ran my F^%#$%#ng wallet through the @%%$^ washing machine! Three-month Libor, the rate banks supposedly lend dollars to one another, rose over six basis points to 4.82%. The worst part is, that rate is a piece of fiction right now. That is the average rate that sixteen banks phoned in to the British Banking Association (BBA). The take out the top four and the bottom four and average the middle eight. Banks have been faking this one for about a year now. The truth is no one is lending to anyone right now. The rate might as well be 10%. See my post a few moments ago, today counterparties that either bought or sold default protection on Lehman Brothers get together and sort out who owes who what on the 87% hit Lehman senior bonds have taken. No one has any idea who is going to have to cough up a lot of cash, and no one knows if they will be able to do it.
The G-7 finance ministers meet today to try to further coordinate policy. There has been a call from the U.K. to have central banks act as clearing houses for bank to bank lending. This means guaranteeing bank to bank loans. So far the U.S. is against this measure, but it has certainly not taken the option off the table.
The Fed also reported yesterday that loans to commercial banks through the discount window almost doubled to $98 billion for the week ended October 8. What makes that really scary is that the $49 billion reported last week WAS A RECORD!
Be lucky today and praise the Lord that it's an early close.
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