At the core of the financial crisis is a simple problem: Banks don’t fully trust each other. So they hoard cash and only lend to each other if the borrowing bank pays enough to justify the risk.
The best indicator of the simmering interbank distrust is an obscure-sounding interest rate known as Libor, which is flashing red. Libor, or the London interbank offered rate, is the rate that banks worldwide charge each other for short-term loans.
Yesterday, the annualized rate for those overnight loans spiked by more than four percentage points, to 6.9 percent, its highest level ever. Normally, Libor on dollar loans is not much higher than what it costs the U.S. government to borrow short-term money, which yesterday was nearly zero.
That tells experts that banks around the world are basically unwilling to lend to each other at any price. It means that cash is not flowing to places that need it. And, if sustained, would ultimately lead to higher borrowing costs for ordinary U.S. households and businesses.
Kinda like recognition of orders and intercommunion, huh?
And the Senate bill allows banks and institutions holding mortgages to book their value at whatever number they want, and does NOT force them to book it at the true market value!!! And they’re trying to build TRUST among each other and the public?!!?