Wednesday, October 12, 2011

If Only People Would Keep Lending Us Money

We keep seeing these explanations for financial crises...it's just liquidity.. They've got plenty of money, they just need just a little more right now... But that little bit more right now involves billions.

PIGNAL: What happened with Dexia is actually a little bit unusual, and it comes back to the fact that Dexia is an unusual bank. They actually had plenty of capital, which is what these stress tests were designed to test. What it didn't have was access to funding, and a little bit like Bear Stearns in 2008. It needed a lot of short-term capital. And because of the Eurozone debt crisis, banks got increasingly nervous about lending to each other, and so the money just ran out for Dexia.

Just one more trip to the dog track...