Banking squeeze

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Let's take yesterday's expected announcement by Lehman Brothers of a $2.8 billion loss and $6 billion capital raising in context.

It coincides with the Bank of International Settlements issuing its latest quarterly financial report makes it quite clear that the banks simply don't trust each other any more. "With market rumours proliferating about imminent liquidity problems in one or more large investment banks, banks became increasingly wary of lending to others. At the same time, their own demand for funds jumped as they sought to avoid being perceived as
having a shortage of liquidity," the report says.

True, what has happened to Lehman is pretty much the result of greed and stupidity where, as The Wall Street Journal points out, it paid too much for property assets.

But as the Bank of International Settlements report suggests, the problem is a lot wider than that with speculation that UBS faces another writedown and reports that Barclays is looking to raise money.


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