Credit and Banks Current event

Here is my link and writeup for this week's current event. This article is about credit and banks of the USA.

Link to, "Lending expands in nervous market," from CNNMoney.com

http://money.cnn.com/2008/11/06/news/economy/commercial_paper/index.htm


Current Event

In this article, “Lending expands in a nervous market,” from CNNMoney.com, by David Goldman, the author talk about the recently stimulated credit market between banks. The Federal Reserve has officially stimulated the credit that banks are extending to each other. Even though the Fed is the main player, other banks have begun to get back to where they were last year around this time with extending credit to each other. The amount of dough being pushed around is up to $1.6 trillion. Back up to a five week high. We're still not where we were last year at $1.9 trillion but it is a sign that it may not be as long of a wait for the economy to get back on its feet. Because of the way things have been going the past quarter, banks and investors are only looking at the return, and that's it. Buying paper is definitely not a prosperous return at this point in time, this is why no one is buying it up because of the risk. They are not interested in helping anyone or anything out. They are only concerned about what is in it for them. The Fed's program was definitely aimed toward providing a “backstop” for the market to stimulate the buying up of paper by other banks and companies. The author believes that this program may still take hold, but he also says that it could take way longer than expected.

I think that this could be the best program that could be enacted and followed through with because this would keep banks where they are at with extending credit to other banks. The Fed can probably turn at least part of the crisis right side up with this program. Our entire economy definitely depends on banks extending credit to one another. If credit didn't exist, the current and past American Economy wouldn't either.