Released: October 03, 2008

Rescue package may not thaw credit markets

Source: Steven Mufson, Washington Post (Free Registration)

As hopes rise for congressional passage today of a massive rescue plan for the U.S. financial system, many financial experts are already wondering: What is being left out and what will have to be done next?

The rescue package may be missing measures intended to offset shrinking bank balance sheets, free up capital for non-financial companies squeezed by the credit crisis, or prevent the possible collapse of a $58 trillion unregulated market in loan insurance policies—known as credit default swaps—written by a variety of firms, say financial experts.

Most urgently, the short-term lending system remains largely frozen, endangering the ability of everyone from small businesses to universities to General Electric to finance day-to-day operations. The financial rescue package will not fully thaw it. 

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