Shoring up the Banking System

Shoring up the Banking System

December 19, 2007

Author:	Lee Hudson Teslik

Banks fear runs of the sort seen earlier this year at Britain's Northern Rock bank. (Press Association via AP Images/John Giles)

It’s not so often that central banks team up. This month, for the first time since 9/11, they did just that when the U.S. Federal Reserve, the European Central Bank (ECB), and three other major banks announced they would attempt to coordinate (Reuters) their responses to global credit concerns. The ECB and the Swiss National Bank said they would provide more loans in dollars (FT). The U.S. Fed, for its part, took a page from the playbook of several European central banks, setting up an auction facility (MarketWatch) through which banks can lend each other emergency funds. Commercial banks have expressed hesitancy about the process of taking short-term loans from the Fed’s discount window—the place where such funds are ordinarily doled out—due to the public stigma and possible share price implications associated with taking a loan. The new scheme aims to better cloak the process, allowing banks that aren’t at risk of collapsing—but need need short-term loans—to get them anonymously.

The news of the varying plans brought mixed reaction from economists. Martin Wolf writes in the Financial Times that “central banks must be pretty worried to take such a joint action.

SOURCE: MORE.Council on Foreign Relations

More: world money markets, ( Secret War? )

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WHO IS WITH DRAWING THE LIQUIDITY?
WHO IS REMOVING/WITHDRAWING THE CASH? into Gold?
THEY MUST KNOW.
Somebody is buying a lot of Gold.
UPDATE 2-Gold nears record-high on dollar, Pakistan turmoil
DOES THIS HAVE AN "ASYMMETRIC" SMELL?
.
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