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Politics : Welcome to Slider's Dugout
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To: RonMerks who wrote (6004)8/16/2007 11:15:10 AM
From: jim_p  Read Replies (1) of 50291
 
Ron,

They have no choice, the commercial paper market is closing up for anything that's related to the mortgage business and is questionable for other customers as the credit crunch worsens.

This will cause the credit crunch to get a lot worse a lot faster.

First the LBO market shuts down and the banks end up with a lot of unfunded commitments they didn't plan on.

Now we have the backup commercial paper lines of credit being funded just in case the commercial paper market does dry up.

The banks were not planning on getting stuck with a lot of LBO debt and they did not plan on having their back up commercial paper lines of credit funded. This reduces the amount of credit that will be available for normal business going forward and will exacerbate the credit crunch going forward.

The pendulum always swings too far in both directions. Leverage has been increasing over the last 5-7 years due to excess liquidity and we are about to witness the unwinding in a period of months.

JMHO,

Jim
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