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Fallout: The Financial Crisis

Credit markets want to see the money

Marketplace Staff Oct 14, 2008
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Fallout: The Financial Crisis

Credit markets want to see the money

Marketplace Staff Oct 14, 2008
HTML EMBED:
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TEXT OF STORY

Kai Ryssdal: If you really want to know whether the bailout plans are working — and, honestly, who doesn’t — there is a way to tell. It’s a little painful, though, and involves more than a passing familiarity with short-term credit markets and something called LIBOR. That’s where our senior business correspondent Bob Moon comes in.


Bob Moon: Never mind debating whether the glass is half empty or half full, at this point, analysts are hoping even just a few meager drops of liquidity can help revive the credit markets.

Kim Rupert: It’s a start, and you have to start somewhere.

Kim Rupert watches the global credit markets for Action Economics. She says banks in the U.S. and Europe are charging each less to borrow money. But she concedes rates are still abnormally high.

Ira Jersey is an interest-rate strategist at Credit Suisse. He says government leaders may be hoping for a psychological boost from their rescue plans. But the credit markets are still mostly taking a wait-and-see approach.

Ira Jersey: The market has not been trading, really, on expectations of some government action but rather waiting until the government action’s actually taken, rather than the announcement of those actions, in order to price in any type of benefit.”

In other words, the markets are in a “show-me-the-money” mode, waiting for real government action.

Jersey: No one really wants to be the hero here and really step in front of what could have bad a very bad situation. Just looking at overall the picture that’s occurred, and all of the programs that they’ve created, we actually think it will be helpful ultimately, but it’s not going to be instantaneous.

But already, the closely-watched London Interbank Offered Rate — LIBOR, for short — is down more than a tenth of a percent. And Avalon Partners chief market strategist Peter Cardillo is encouraged.

Peter Cardillo: If that continues, then I think we’ll begin to see the markets begin at least to function. Maybe not totally 100 percent, but certainly not frozen.

Still, the stubbornly high rates signal lingering mistrust — and suggest a long way to go before a return to normal levels.

In Los Angeles, I’m Bob Moon for Marketplace.

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