Why don't interest rates rise, if credit is so tight?

Discussion in 'Economics' started by swtrader, Oct 3, 2008.

  1. banks are saying 'we need a bailout! there's no money to lend!'

    buy if you have a money market, or bank account, they say 'sorry we cant pay you anything, rates are so low'

    which is it?
  2. H2O


    There is plenty of money. This crisis is all about confidence. Banks are not willing to lend (not even to each other) because they do not know their counterpart's risk.

    Because most 'well capitalized' banks do not lend money out, they are sitting on plenty of money and do not need yours / cannot place it at other banks for a margin, hence the low rates.

    Hope this helps...
  3. Daal


    what are you talking about. WM was paying 300bps above fed funds before they went under. less than $100k and it was equivalent to treasuries
  4. what i'm saying is, rates are waaaaaaay below where they were, in 1997, when the economy was pretty good

    i thought when credit tightened, money was available, but at a higher rate to higher credit quality applications?

    this looks more like they're just shutting it off till they get their way
  5. Bank to bank money is tight, as 1 month LIBOR is at 4.11%.

    Easy to find high yield savings accounts. www.dollarsavingsdirect.com offers 3.75% APY for a $1000 minimum deposit.
  6. slightly modified

    "Admittedly there is a risk in any course we follow other than this, but every lesson in history tells us that the greater risk lies in appeasement, and this is the specter our well-meaning bailout friends refuse to face--that their policy of accommodation is appeasement, and it gives no choice between presoperity and depression, only between voting no and bailout. If we continue to accommodate, continue to back and retreat, eventually we have to face the final demand--the ultimatum. And what then?"