Snappy newsletters. Simple Facebook sharing. Spirited comments. Sweet features are waiting… GET THEM NOW!

Banks Bracing as Their Own Debts Come Due

Billions in shorter-term, floating rate notes likely to prolong credit woes

By Jim O'Neill,  Newser User

Posted Aug 27, 2008 9:24 AM CDT
Email

(Newser) – Billions of dollars worth of floating rate notes—vehicles used by banks to borrow money—taken out in 2006 are coming due in the next few months, and the industry is bracing for a wave of bank failures and asset sales as institutions struggle to pay off obligations, the Wall Street Journal reports. As a result, analysts say, credit will tighten further, worsening the US economic slowdown.

Some $787 billion in notes—a 43% jump over the previous 16 months—will come due through 2009, with $95 billion next month. As the banks scramble to pay, they’ll be less likely to make loans to businesses and consumers—and they face significantly higher interest rates for borrowing themselves. Central banks in the US and Europe are also under pressure to loan money to cover debts.

A banner is seen outside one of the buildings belonging to the headquarters of Wachovia Securities.
A banner is seen outside one of the buildings belonging to the headquarters of Wachovia Securities.   (AP Photo/Jeff Roberson)
The building on Broad Street in New York's Financial District that houses brokerage firm Goldman Sachs.
The building on Broad Street in New York's Financial District that houses brokerage firm Goldman Sachs.   (AP Photo/Richard Drew, file)
A man walks into a Merrill Lynch office.
A man walks into a Merrill Lynch office.   (AP Photo/Paul Sakuma, file)
Morgan Stanley headquarters is shown in New York.
Morgan Stanley headquarters is shown in New York.   (AP Photo/Mark Lennihan)
« Prev« Prev | Next »Next » Slideshow
To report an error on this story, notify our editors.
A snapshot of the day's best news stories.
 
COMMENTS
Be the first to comment on this story.

FDIC: Banking industry goes from bad to worse
New York Times

Credit crunch tightening even more
BusinessWeek

 
Goldman Sachs • Morgan Stanley • Merrill Lynch • debt • central bank • interest rate • credit crisis • floating rate notes

More Newser Stories

8 Days That Shook the Financial World

Brain Drain Wallops Wall Street

Morgan Stanley to Withhold Bonuses Until Bets Pay Off

Times Tough for I-Bankers, in 'Marie Antoinette' Kind of Way

Execs Were Paid $3B to Lay Credit Crisis Foundation
NEWS FROM OUR PARTNERS
Other Sites We Like:   24/7 Wall St.   |   Betty Confidential   |   BuzzFeed   |   Cracked   |   Fark   |   Timelines   |   The Frisky   |   Geek Sugar   |   NewsOne