- White House to Crank Up Pressure on Mortgage Industry
- Treasury Threatens Banks, Not Borrowers
- Dubai World to Restructure About $26 Billion of Debt
- Cramer: Dubai Can’t Sink These 6 Dividend Stocks
- Bove: 26 Banks May Need To Raise More Capital
- Lesson From Dubai: Start Cutting Risk In Your Portfolio
- Iranian Seizure of British Yacht Pushes Oil Above $77
- Should Homeowners Be Able to Stop Paying Mortgage?
- Buffett's Predictions For Next Year—And Every Year
- Treasury Threatens Banks, Not Borrowers
- We're Approaching a Market Bubble: Portfolio Manager
- Hershey Shares: What Options Are Saying
- Nov. 30: Unusual Volume Leaders
- Why Careful Shoppers Are Great for the Box Office
- Blue Nile CEO: 'We're Having the Best Cyber Monday Ever'
- Best Online Retailers to Buy Now: Internet Analyst
- ESPN The Magazine’s Body Issue: A Financial Success
- Cyber Monday: The Last Vestige of Dotcom Hype
MOST SHARED
- Timeless and Time-Tested Warren Buffett Watch Predictions
- Goldman Sachs Party Ban: No Gatherings of 12 or More
- Should Homeowners Be Able To Walk Away From Mortgage?
- Dubai World Set to Restructure About $26 Billion of Total Debt
- Treasury Threatens Banks, Not Borrowers
- Cyber Monday: The Last Vestige of Dotcom Hype
- Notre Dame Fires Charlie Weis After 5 Seasons
- Nov. 30: Unusual Volume Leaders
- Bove: 26 Banks May Need To Raise More Capital
- Oil Demand Sees Year-Over-Year Rise, First Since 2007
Text Size 
Pressures in the credit markets are likely to ease this week as government efforts to inject capital into the banking system take hold, said Bill Gross, head of bond titan Pimco.
With the Federal Reserve and Treasury stepping in to, among other things, buy commercial paper at a 2.88 percent interest rate, current Libor rates are bound to fall, Gross said on CNBC.
Libor, or the London Interbank Offer Rate, is the amount banks charge each other to lend overnight, a pivotal rate for the industry which relies on short-term lending for capitalization. The 3-month Libor rate stood at 3.5 percent Monday morning, while overnight Libor was at 1.27 percent.
"There's no way that three-month Libor can stand at that level," Gross said. "That's going to close very quickly."
He added that the bank recapitalization is even more important than a second government program to help out people who are behind on their mortgages or whose homes are worth less than they owe on them.
That's because the reluctance of banks to lend even to each other has acted as a dam against economic growth. Once banks start to lend, the economy can begin to fend off inflationary pressures.
Yet Gross acknowledged that he was not comfortable with the government taking such a heavy hand in the free-market system.
"We're not comfortable with it, we simply recognize ... it's necessary to fill a tremendous hole in terms of delevering and liquidity in the market," he said. "It's just something we have to do."
The first $125 million in the bank recapitalization program was executed with nine major banks Sunday night and "will go out the door for those institutions early this week," David Nason, the Treasury Department's assistant secretary for financial institutions, told CNBC.
The new lending facility for the commercial paper industry begins today.
Also, the Federal Reserve on Wednesday is widely expected to cut the key federal funds rate another half point, to 1 percent, in what what many assume will be the end of its aggressive easing campaign.
Print
Email
- Ever wished your cab driver would stop chatting and just get to where you're going? Well, that moment is closer than ever.
- UPS is giving its customers the option to offset its carbon emissions when sending a package.
- Romania's presidential campaign has been rocked by a video that may show the president striking a 10-year-old boy.
- Raising alligators is hard work, and the fickle taste of rich consumers has just made it much harder, says the NY Times.
- A recent issue of ESPN Magazine was one of its top sellers ever, and it only took scantily clad athletes to make it happen.
- The continued real estate boom in China is partially fueled by a generational flood of newlyweds.
Data is a real-time snapshot *Data is delayed at least 15 minutes