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Tuesday, September 16, 2008

Fed Definately Losing Control. Fed Funds Hits 6%

Money-Market Rates More Than Double Amid Global Credit Seizure: “The cost of borrowing in dollars overnight more than doubled as banks hoarded cash amid speculation more financial institutions will fail.

The overnight dollar rate soared 333 basis points to 6.44 percent today, its biggest jump, according to the British Bankers' Association. Rates climbed yesterday after Lehman Brothers Holdings Inc. succumbed to mounting credit-market losses and filed for bankruptcy.”

I mentioned this yesterday in Losing Control? Fed Funds Climb to 6%. It looks like we have follow through this morning.

The markets now face the very real possibility of a disorderly liquidation. (That’s just a fancy way of saying MELTDOWN.)

“The European Central Bank, Bank of England and Swiss National Bank offered financial institutions emergency cash for a second day today as the credit rout threatened to derail markets.

The Frankfurt-based ECB offered 70 billion euros ($100 billion) in a one-day refinancing operation. Fifty-six banks bid for a total of 102.5 billion euros. The Bank of England injected 20 billion pounds ($36 billion). The SNB also said it will offer overnight cash.”

The ECB and BOE are all scrambling to inject record amounts of liquidity.