It's early Friday morning and the news continues to be troubling. The Asian markets took it on the chin and are way down. Right now the DJ Futures is off close to 200 which foretells another off day for Wall Street.
The G-7 is meeting in Washington and have a very hard task ahead of them.
The G-7's dilemma is that even after a battery of policy actions, money markets remain gridlocked as banks shun lending to each other for fear they will lose the money or because they need it for their own funding needs. The cost of borrowing dollars for three months yesterday surged to the highest this year.
The U.S. was also weighing a proposal to insure all U.S. bank deposits, the Wall Street Journal reported today. The plan was only at discussion stage and would be aimed at preventing an exodus of cash from financial institutions, the newspaper said. To remove the ceiling on deposit insurance government agencies would need to agree there was systemic risk to the economy, thereby invoking the legal power for action, the Journal reported.
While the Treasury still aims to buy troubled mortgage- backed securities from financial institutions, a direct capital injection would offer more immediate relief by giving banks quick access to funds they could then lend out. Bloomberg, Oct 10, 2008
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