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What are effects of new $70B fund setup by banks for liquidity?
http://www.bloomberg.com/apps/news?pid=20601087&sid=aXJ0h39wcwxg&r efer=home
Will the cost of borrowing from this fund go up for participants if they are reaching the 1/3 limit? Do you think credit agencies will use this as another feeder of information for future ratings?
Answers
788 points
DaveDiggz answered one year ago …
I think this will be more like the inter-bank credit funds that banks make to one another. It'll be there to provide temporary liquidity in the event of a firm, like Lehman, going under and needing to unwind massive positions. So I don't think this will affect a firm's credit rating directly, but the fact that it even needs the liquidity will have probably been made evident in other parts of its business, and THAT would've already affected its credit.
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