After Weekend Financial Huddle, No Sign That Lenders Will Thaw -by Floyd Norris
At the end of a weekend when nearly all of the world’s major bankers and finance ministers gathered in Washington to stanch the global credit crisis, there was no assurance that credit would flow when markets reopen this week.In an effort to get credit moving, European leaders on Sunday promised to guarantee new loans to banks, which have stopped lending to one another as the crisis has deepened. But they left it up to each nation’s government to provide details of how its own banking system would be protected. Australia also announced such guarantees, but there was no similar announcement from the United States, where officials declined to say what action, if any, they would take.
Many of the financial support measures rushed through by American and European leaders recently have been aimed at restoring that lost faith. But while it is not at all clear that a return to normal lending between banks would restore credit availability to companies that are finding it difficult to borrow, it is hard to imagine that happening unless the interbank market starts functioning smoothly again. Monday is a partial holiday in the United States, with the stock market open but some banks celebrating Columbus Day. That could delay until Tuesday the development of clear evidence of whether the banks are still afraid to lend to each other — and of whether the credit crisis will continue to worsen.
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