Friday, October 03, 2008
Yesterday Thursday a senior market practitioner in a major financial institution wrote to me the following:
Situation Report: So far as I can tell by working the telephones this morning:
* LIBOR bid only, no offer.
* Commercial paper market shut down, little trading and no issuance.
* Corporations have no access to long or short term credit markets -- hence they face massive rollover problems.
* Brokers are increasingly not dealing with each other.
* Even the inter-bank market is ceasing up.
This cannot continue for more than a few days. This is the economic equivalent to cardiac arrest. Then we debated what is necessary to restart the system.
Financial and Corporate System is in Cardiac Arrest: The Risk of the Mother of All Bank Runs