More bad news for banks
Wall street’s 5th largest investment Bank, Bear Stearns had to take out an emergency fund from the Federal Reserve last week as it was unable to fund its daily business.
There are concerns that other banks may follow suit which is causing shares to drop. The weakness of the dollar and the high oil prices is also adding to the effect. All this and also the fact that other banks may require further emergency funds may send the US into recession.
The problem started when banks became unwilling to lend to each other after they suffered losses linked to the housing market in the US and also the “sub-prime” sector. This is where lenders deal with clients who have bad credit histories. There has also been a record number of borrowers who have defaulted on loans.
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