Le Tarp? Geithner’s European Junket

[Donnachaidh]

http://www.counterpunch.org/2011/09/16/geithners-european-junket/

On Thursday–exactly 3 years after Lehman Brothers defaulted igniting the greatest financial crisis in 70 years–the world’s most powerful central banks launched a massive intervention to staunch a liquidity squeeze in the eurozone that threatened to wreak havoc on the EU banking system. The European Central Bank –acting in cooperation with the Federal Reserve, the Bank of England, the Bank of Japan and the Swiss National Bank–agreed to provide limitless loans to banks that are having trouble getting dollar funding. European banks access to US money markets has been sharply reduced in the last year due to worries over their solvency. The joint-central bank action is designed to ease liquidity problems, allay investor fears and avoid the painful task of restructuring underwater banks. Stocks rose on news of the emergency intervention. The Dow finished up 186 points on the day. This is from the Wall Street Journal:

“European banks need the U.S. currency to fund loans they have extended to U.S. companies and consumers. European banks also need dollars to repay past borrowings they made in dollars, such as loans from U.S. money-market funds…

European banks have lost access to more than $700 billion in U.S.-dollar funding—short-term IOUs and interbank loans—over the past year from U.S. money-market funds and others worried about exposure to Greece and other troubled European economies, according to J.P. Morgan Chase & Co. and CreditSights research…..

“Things are deteriorating,” said Joseph Abate, a money-markets specialist at Barclays Capital in New York. “This week and certainly probably since August, it seems like their access to unsecured really has tightened up.” (“Europe Lending Woes Deepen”, Wall Street Journal)

More at the link --

[Safetykitten]

1. Thank God it will Le Pass!