Roubini: Funding Freeze Spills Over To The Corporate Sector, Money Market Conditions Worsen Further

[RedEarth]

Money markets, interbank markets, inter-dealer markets, short-term commercial paper markets all seize up in U.S. and in Europe. Only source of liquidity is central banks. Despite record liquidity injections into the banking system, banks hoard the cash instead of making new loans for fear that they won't be paid back. Increasingly, non-financial corporates in need to roll over maturing debt have no access to liquidity, both short- or long-term. If immediate funding strains don't ease, default rates could rise massively due to a pure liquidity crisis--> Roubini: "At this point we have reached the final 12th step of my February paper on “The Risk of a Systemic Financial Meltdown: 12 Steps to a Financial Disaster”

Roubini: extreme situation requires extreme remedies. To do: Allow corporate sector to roll over their short tem debt: Fed should extend lending facilities to the corporate sector directly and including buy their short-term commercial paper in a approprately secured way.

Radically redesign the Treasury TARP rescue plan - possibly after its necessary approval today - to make it effective, efficient and fair: a) an emergency triage between insolvent and illiquid and undercapitalized but solvent banks should be made; b) a sharp reduction of the mortgage debt burden of the insolvent household sector; c) and a recapitalization of solvent banks to be done via public injection of preferred shares and matching contributions by current shareholders of the banks

http://www.rgemonitor.com/

[orwell]

1. Why would anyone listen to him...

...he has been dead on accurate for a very long time about this whole debacle. Therefore, in moderern post-factual America, his views are useless.

In America we have been well conditioned to value half-wit pundits, blowhard politicians, preening celebrities, and millionaire news readers.

Competence has been permanently thrown under the bus.

Stop being so accurate Nouriel and maybe the chattering class will take notice.

Being right is just killing your credibility...

[Zenlitened]

2. LOL... in a grim and hollow sort of way. :(

You are exactly right, unfortunately.

In America we have been well conditioned to value half-wit pundits, blowhard politicians, preening celebrities, and millionaire news readers.

Competence has been permanently thrown under the bus.

Nothing is ever truly permanent, I suppose. But the trendline over the past several decades doesn't look very promising.

We'll get a very clear indicator on Nov. 4, when voters make a choice: Obama and competence, or McCain and the same old blustering bullshit.