Sunday, 4 November 2007

US Federal Reserve Continues to Bail out Failing US Banks- Pumps in 41 billion.

The US central bank typically buys billions of dollars worth of securities from major banks, pumping extra cash into the banking system, which the banks are obliged to repurchase at a later date.

The important thing to remember is that the Banks have to pay back these loans. How much money do they owe the Federal reserve in total from all the other bailouts we have witnessed in recent months ? No wonder the markets are selling off banking stock at the moment.

This reminds me somewhat of the Asian Financial Crisis of the 1990s- where the lending institutions suffered greatly because of poor loan practices. Responsible loans, and slower growth, would have avoided the calamity. As a consequence of the failed loans, money to drive growth in Asia dried up and it took years to recover.

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