The Fed Gets Desperate
The Federal Reserve is teaming up with foreign central banks to provide more liquidity to the banking system. This comes after weeks of pumping billions into the banking system in an effort to keep the financial system afloat.
In spite of those previous moves, the news just seems to get worse and the latest move by the Fed may appear to some as a sign of desperation. Foreign central banks have an incentive to help out because the sub-prime mortgage meltdown in the U.S. and ensuing credit crunch have already resulted in multi-billion dollar write-downs for some foreign banks and financial firms.
Today student lender Sallie Mae slashed their earnings forecast while they continue their feud with a private investor group that backed out of buying them. More banks are predicting bigger losses.
Yesterday Washington Mutual or WaMu, one of the nation’s largest mortgage lenders, announced layoffs and slashed its quarterly dividend from 56 cents share to 15 cents per share, in the face of mounting losses.
Fannie Mae and Freddie Mac warned of more losses extending into 2008.
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