Word: lend
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Dates: during 2000-2009
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...like giving an alcoholic more booze," says Gabriel Stein, director of Lombard Street Research in London, noting that while the degree of debt varies by nation, it's become a troubling factor for households and companies throughout the developed world. "Banks are being told to lend money to people who have already surpassed their borrowing capacity - and being told to do so under the same terms applied during the credit boom. It's not a good idea." But so far, no one seems to have come up with a better...
...business activity. But this time, the gigantic cost of bank bailouts will leave national treasuries with little room for maneuver. Indeed, the bailout plans - under which stricken banks will receive direct injections of taxpayer money to strengthen their capital base, while governments provide guarantees aimed at getting banks to lend to one another again - may well throw government finances seriously out of kilter...
...theory, these programs should directly reassure businesses and banks that it's safe to borrow and lend. But the programs are not directly funded by the government, and rather will function as insurance paid for by premiums paid by the banks themselves. It may work, but it's not the same as having full taxpayer guarantees...
What happened on Tuesday shows that might be changing. On trading floors, for the first time in more than a week, buyers and sellers focused on earnings and product launches instead of what was being said at press conferences in Washington and the interest rates banks charge to lend each other money. Even though those rates, which are closely followed as an indication of whether the credit crunch is getting better or worse, only eased slightly on Tuesday, it was enough to free up investors' minds to focus on the fact that, in the long run, the thing that determines...
...credit markets moving again, economists have called for governments to guarantee short-term interbank loans. "Recapitalization by itself won't fix the interbank lending market," says Roger Craine, another Berkeley professor and a former Federal Reserve economist. The big problem now is that banks are unwilling to let go of their money because of counterparty risk - the fear that the borrower may go under, sticking the bank with the loss. "If the bank you lend to has assets in a hedge fund that goes under then they are likely to go under," explains Craine. A coordinated interbank debt guarantee...