Europe's central banks pumped huge amounts of cash into markets today as stock exchanges dove and interbank lending slowed to a trickle. Just after midday in London, the FTSE 100 was down by nearly 2%, with investment banks and insurers leading declines. The Bank of England injected $35.8 billion into the markets, while the European Central Bank released nearly $100 billion in emergency funds.
Amid extreme volatility, the London Interbank Offered Rate, or Libor, posted its biggest jump ever—meaning that banks are hoarding their money and refusing to lend to one another. Many banks are short of cash because of deals with Lehman Brothers, which need to be resolved in bankruptcy proceedings. "In a healthy economic system, there is confidence," said one trader at Société Générale. "That confidence is gone."