Busted: Bankers and The Global Economy

July 11, 2008

Banking Economy: More Stability and Danger

Wall Street Investment Bankers didn’t borrow from the emergency lending program of the Federal Reserve over the past week. Perhaps we are seeing signs of confidence or what is perceived as a lack of need. This creates additional hope as the banking community appears to be backing off of Federal Reserve funding.

Investment bankers failed to draw loans for the week ending July 9, borrowing $1.7 billion in the previous week, down from $6.1 billion the week before that.

Meanwhile, the regulatory prowess of the Federal Reserve is increasing as they work to initiate new rules that discourage assumption of safety in the banking community. Assumption coupled with false confidence is exactly led to the downfall of bankers and the U.S. economy, starting a global chain reaction.

Now, the “bears” rule and the economy falters as government lending guarantees endanger the stability of the market on new fronts. All financial firm investment is questionable at best during these times. Fannie Mae and Freddie Mac have faltered and face bankruptcy as the government forms bailout plans. The market says beware. The government continues to say “no problem”.

The banking system is so highly-leveraged that write-downs for commercial banks are practically guaranteed. Finding new money sources to stay afloat or properly capitalized may prove a challenge in the future on a number of fronts. Less leverage means less profit for investors that want only more profit. Banking is no longer a global investment wunderkind.

Slim pickings are what the U.S. economy faces going into mid-summer.

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