Word: short-term
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...constipated credit markets that are stalling the global economy. Under normal circumstances, interest-rate cuts by central banks would promote interbank lending. But Wednesday's coordinated rate cuts in the U.S., Europe and Asia have failed to restore lenders' confidence. The London Interbank Offered Rate, the benchmark for short-term interbank lending rates, actually rose to 4.75% Thursday, its highest level of the year. In Hong Kong, interbank lending rates have doubled in the past month. Banks remain gun-shy about resuming lending, in part because they remain unclear about the scope and details of a proposed U.S. bailout...
...world's economists have been nearly unanimous in saying that only a coordinated, worldwide effort can stem the current credit crunch and companion market meltdown. Their proposed solutions include: cut interest rates, recapitalize the banks and insure deposits; get governments to step in and guarantee short-term interbank lending. "The first good thing about this situation is that it does not call for different central banks and Treasuries to do different things, but rather for them all to do the same thing in unison without fouling each other's oars. That should be relatively easy to arrange," wrote University...
...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...
...lead and start queuing up in Washington looking for money simply to be able to pay their teachers and firefighters. While all states have to deal with an uneven influx of revenue from tax collection, California is among the very few that deal with temporary shortfalls by issuing short-term debt. Most states instead rely on internal cash management - in some cases, borrowing from their own pension funds if necessary - which means they aren't dependent on outside borrowing in order to make payroll and keep the lights on. And even those municipalities that do use short-term notes...
...million worth of bonds to finance education and public works projects around the state. It was one of the first major issues since the Federal Government started taking one unprecedented step after another to try to jolt lending back to life - cutting interest rates, starting a program to buy short-term corporate debt, authorizing hundreds of billions of dollars to get toxic mortgage-related assets off bank balance sheets and inject capital into the companies. "We were really worried," says Jonathan Miller, the state's secretary for finance and administration. "We had encountered a lot of pessimism and skepticism that...