Editor’s note: This is the full-length version of Mr. Wallman’s commentary. For a shorter version, go to sfgate.com/opinion We’re in trouble. Although markets and Wall Street institutions are melting down (with the occasional bounce back), the central issue…
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How bad is it? This is the worst financial crisis in 60 years, and it has shaken the banking system to its foundations. Even the Chancellor, Alistair Darling, has compared the crisis to the Great Depression and he is not given to overstatement.
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In the largest rise on record, the British Bankers Association reported that the overnight U.S. dollar inter-bank lending rate (LIBOR) jumped 431 basis points to 6.88%.
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The New York Times’ Julie Creswell and Ben White said it is “The end of an era.“
They describe yesterday’s Wall Street as “a world of big egos…where people love to roll the dice with borrowed money…in search of ever- higher returns,” and what those returns can buy. A place where private equity firms “amassed giant funds and went on a shopping spree, snapping up companies as if they were second wives buying Jimmy Choo shoes on sale.”
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After failing to pass a bill geared at kick starting the financial system in the United States on Monday, market participants are looking for help from central bankers in the form of rate cutsand a return of the failed bill as early as Thursday.
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The S&P Case-Shiller home price index fell more than expected in the July as the 20-city composite index posted an annual decline of 16.3%, extending the prior month’s 15.9% decline.
The Case-Shiller index has fallen every month since peaking in July 2006, but economists say the rate of decline may be slowing, as evidenced by the three-month annualized rates.
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As the U.S. Congress voted to reject the bailout legislation, Fed Funds Futures are pricing in a 66% chance of a 50bp rate cut and 34% of a 75bp cut for the next Federal Reserve meeting scheduled for Oct. 29.
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Economic data realeased today will include the S&P/Case Shiller house price index, consumer confidence, and the Chicago purchasing managers index. But in the aftermath of the House of Representatives rejecting the financial rescue package, all eyes and ears will be on global central bankers and policy-makers.
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The Federal Reserve’s Thomas Hoenig said he will be more anxious than others to raise rates when feasible. The Bank of Kansas City President was speaking at a bank-sponsored forum in Nebraska.
Hoenig said inflation in the U.S. at 5.5% is too high, and will have a long-run impact on the economy. High commodity prices have put pressure on finished goods prices, he said…
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