Liqıuidity puzzle – banks play hardball to increase pressure on DC

Banks are using their tools to put up pressure on D.C. for the bailout bill to pass. This is now hurting Main Street even more with corporations forced to scream foul by the banks. They have as much liquidity as they never had before – unprecedented amounts of money are poured into banks from central banks but they just lock it into their safes (figuratively). It’s pretty obvious they create more pressure on the Congress and, to make it more convenient, that it’s not a bailout of Wall Street anymore. They let corporations bleed for a few days to get the momentum going for the Congress and Main Street to agree on the overall impact for the economy.

Excerpt from Bloomberg:

Treasurers Try to Keep Credit With `Hardball’ Banks (Update1)

By Duane D. Stanford, Gabrielle Coppola and John Detrixhe

Oct. 3 (Bloomberg) — Almost 100 U.S. corporate treasurers gathered for an emergency conference call yesterday to warn each other that banks are using any excuse to charge more to renew lines of credit.

“Capital is fleeing to safety,” said Edward E. Liebert, treasurer of Rohm & Haas Co., who took part in the 90-minute call organized by the National Association of Corporate Treasurers. “Interbank lending is not free-flowing any more,” said Liebert, 56, chairman of the Reston, Virginia-based trade group.

These are just measures of playing the game since after passing the bill, suddenly the gates will open again and everybody is supposed to cheer up that the bill has saved everybody?! Markets are already assuming the positive outcome, since on a bad employment number -159k futures were bought up after a brief dip, since that also increased the pressure. Comparable with the pitcher throwing the ball accidentally at the batter to scare him off.

It’s not only about the D.C. situation, the gathering in Europe this weekend to get a similar package of $450 bil. to bailout European banks is very controversial with the Germans against it.

That is the major reason for the strong Dollar, since suddenly they have on top of the US mortgages trouble with European mortgages as well. Now the price of globalization will have to be paid and it will be a hefty bill to pick up the next years and put the EU in a severe structural crisis. The Germans, who have an almost safe mortgage market with the principle backed by asset-biased life insurance so you only pay the interest and the life insurance pays down the principle after 30 years, will have trouble bailing out other countries’ banks problems due to a different system.

We are heading for a severe global crisis which will not only have to deal with capital implications but also political structures. The pendulum will swing back from globalization to nationalism – everybody will be caught in the situation to be to busy with his own mess and therefore retreat from international arrangements and agreements slowly.


~ by behindthematrix on October 3, 2008.

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