Credit crunch has “no end in sight”

According to this article on banks continue to tighten their lending standards. 

The measurement in which this article focuses on are derivatives which are priced to reflect the market’s expectation of future spreads between the Fed’s daily effective Federal Funds Rate and the rate at which banks are actually lending money.  When spreads increase it is a sign that banks are reluctant to lend and therefore demand a higher return on their loans to pursuade them to lend.

According to the article:

* Banks are charging each other a premium of about 78 basis points…The spread is up from about 24 basis points in January, and may widen to 85 basis points, or 0.85 percentage point, by mid-December, prices in the forwards market show.

* “Things are going to get worse before they get better.”

The crisis is “not over and I’m not exactly sure when it’s going to end,” Nobel Prize-winning economist Myron Scholes.

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