‘Financial panic’ over? Fed lends direct to companies

The US Federal Reserve is now bypassing the banking system, and dealing directly with major corporate borrowers. These have been cut off from many sources of credit, as banks hoarded their cash.

The impact has been immediate, with 1500 transactions already done for a record $67bn - 10 times last week’s daily level. This should provide major help for companies, as it frees up their ability to undertake normal day-to-day operations. Equally encouraging is the fact that it also caused a 20% fall in 90 day borrowing rates, to an average 2.55%.

The blog warmly welcomes this latest move to unblock credit channels. If followed by other central banks, it should mark the end of the Panic that has frozen most all financial markets since Lehman’s failure last month.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. He also serves as a Global Expert for the World Economic Forum. The aim of this blog is to share ideas about the influences that may shape the chemical industry and the global economy over the next 12 – 18 months. It looks behind today’s headlines, to understand what may happen next in critical areas such as oil prices, China and Emerging Markets, currencies, autos, housing, economic growth and the environment. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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