Global Snapshot

Global Overview

  • September was dominated by a growing sense of crisis in the US and European financial systems.
  • Among the month’s events: two US mortgage giants, Fannie Mae and Freddie Mac, were moved into government conservatorship; a US investment bank, Lehman Brothers, was allowed to fail and the UK’s Bradford & Bingley bank and the Belgian bank, Fortis, were nationalised.

  • The level of distrust became so great that banks were unwilling to lend to each other and accepted rock-bottom interest rates from the government. The spread between interbank rates and Treasury bill rates (the TED spread) soared.

Money markets become dysfunctional

Chart

Source: Datastream

 
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