With the bailout package receiving congressional approval, the Federal Reserve Board and Treasury Department are hoping that banks, which are hording cash, won't wait to release credit until the package actually is implemented. The restriction in credit is raising borrowing costs for customers. Additionally, the unwillingness of banks to lend to each other also has caused borrowing from the Fed to soar, with new records being set every week.
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The New York Times reports
that "U.S. banks' borrowed a record $367.8 billion per day from the
Federal Reserve in the latest week, as financial institutions relied
heavily on the lender of last resort amid the most severe credit crisis
since the Great Depression."
The figure was almost double the previous record daily average of
$187.75 billion set just the week before, according to Federal Reserve
data.
The London Interbank Bid Rate, or LIBOR, the lending interest rate that
banks charge each other on loans, has taken off thanks to the almost
weekly bank runs and bank rescues being caused by the credit crisis.
Set on Friday morning in London, three-month LIBOR rose again, hitting a
nine-month high of 4.33%.
In practice, that means banks are hoarding cash, and slowing economies
worldwide. - George White
See story from The New York Times
