Fallout: The Financial Crisis

Did the election help credit markets?

Jeremy Hobson Nov 4, 2008
Fallout: The Financial Crisis

Did the election help credit markets?

Jeremy Hobson Nov 4, 2008


Kai Ryssdal:
I say this with no small amount of reluctance, but there are some really smart people out there who think the stock markets have put the worst behind them.
That said, nobody’s really thinking about stocks tonight, are they. That’s understandable.
Except we wouldn’t want you to miss this: Two months after Lehman Brothers collapsed and really put the credit markets in the deep freeze, they’re back to something more normal. We sent Marketplace’s Jeremy Hobson to find why.

Jeremy Hobson:
William Larkin is a fixed-income portfolio manager with Cabot Money Management.
In other words, he advises his clients on what debt they should buy.
Which means he’s got a front-row seat to the freak show in the credit markets.

William Larkin: Two weeks ago, it was like I was in the hurricane zone, you know, 15 minutes before it was going to land. There just was nobody around. It was a ghost town.

Now, he says, the market is filling up, slowly.
He says it’s at about a quarter of its normal capacity.
So, does the thawing of the credit markets have anything to do with the election?

Larkin: It’s a voting mechanism because everybody votes with their money and the election is a small piece of it. But it really has to do with the foreign central banks more than who’s President of the United States.

Bruce McCain agrees. He’s a chief investment strategist at Key Corp.
He says direct injection of cash into banks and loan guarantees from governments around the world have brought interest rates down for borrowers, but . . .

Bruce McCain: They’re not back to normal, they’re just trending in that direction.

Guy Lebas is a fixed-income strategist at Janney Montgomery Scott.
He’s says investors are more interested in the Fed’s plan to buy commercial paper and whether more banks will unravel.

Guy Lebas: And moreover, there’s no indication that the two candidates are going to do anything drastically different with regard to economic and financial policies that would help to ease this crisis.

And whatever the new President does do, probably won’t happen until after January 20.
And as we know now, a lot can change in the credit markets in two short months.

In New York, I’m Jeremy Hobson for Marketplace.

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