http://www.interest.co.nz's morning briefing of what's news here and around the world. Everything you need to start the day in 90 seconds at 9'oclock.... Starting now
With news that the US government wants the Federal Reserve to take a much more active role in regulating and supervising investment banks.
This comes after the Fed engineered the bailout and forced sale of Bear Stearns. It also comes after the Federal Reserve started lending directly to investment banks and started taking on mortgage backed bonds that investment banks didn't want to hold.
Observers are now saying the Fed's actions nearly two weeks ago completely changed the landscape for banking and investment banking in America, and therefore globally.
The price for that heavy Federal Reserve intervention is more regulation of investment banks.
Meanwhile, life is not getting easier for regular banks trying to borrow money from each other. The thought that the Fed's intervention might ease tensions and reduce spreads between bank debt and government debt has not worked out.
Last night Citigroup had to offer 3% more than government debt to sell a billion dollars worth of bonds that were rated AA minus. That is more than double the spread it had to pay late last year.
Lenders remain very nervous. This was not helped by research from Goldman Sachs reporting that the global credit crunch will eventually cost 1.2 trillion US dollars. So far banks have only reported losses of about US$150 billion US dollars. That means there's still a trillion dollars of losses to come.
That was 90 seconds at 9 o'clock. I'm Bernard Hickey for interest.co.nz.
<< Back to article
