Markets breathed a sigh of relief (cheered even) jana, as Lehman Brother and Goldman Sachs, two of the top 5 investment banks in the world revealed that yes things were bad (Q1 profits down 57% and 53% respectively), but not as but as Bear Stearns. Because of its previous life as a number 1 fixed income broker, Lehman Brothers was feared to be going the Bearway, but its share price recovered after its announcement. Still, it
makes you wonder why there were fears unless it was having problems settling positions.
The problem is that this is now no longer a stock markets issue. Many banks are no longer willingly lending
to each without adding a premium. This then translates to each bank having less funds to lend to the
joe public. In turn means that interest rate cuts will not have the intended effect which is to lower the
cost of borrowing for mortgage borrowers and credit card holders, the key drivers of the economy in the West.
Its a paradox that the financial ministers of the big economies need to figure out. Not to mention commodities-related inflation.