Thursday, March 13, 2008

Fed to the Rescue?

If you're only occasionally following news of the global credit crunch, I recommend you read this piece by The Telegraph's Ambrose Evans-Pritchard. While the author's personal credibility has been called into question in previous years, his piece lays out a fairly clear overview of steps being taken around the world to forestall an entirely new level of economic crisis. It makes for depressing reading, but the piece makes it clear that we're facing serious days. Some snips:
The US Federal Reserve has taken the boldest action since the 1930s, accepting $200bn of housing debt as collateral to prevent an implosion of the mortgage finance industry and head off a full-blown economic crisis...

The Fed's dramatic step came after an emergency conference call by governors on Monday night. It followed the melt-down of the US chartered agencies -- Fannie Mae, Freddie Mac, and other lenders -- which together guarantee 60pc of the entire US home loan market...

"The agency crisis was a Tsunami event," said Tim Bond, global strategist at Barclays Capital...

Bernard Connolly, global strategist at Banque AIG, said the Fed action may help calm the markets for now, but it cannot solve the root problem of eroded of bank capital.

"There is the risk of a very damaging credit contraction. We face the most serious global crisis since the Great Depression. But this time at least the North American central banks are doing their best to stop it spreading to the real economy," he said.
Read the entire article: Fed takes boldest action since the Depression to rescue US mortgage industry

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