Bank-To-Bank Loans Front Line Of Credit Crisis

The credit crisis is definitely affecting ordinary people. Customers are finding that when they need a loan, they are unable to get one. It's not because their credit is bad — it's because banks are afraid to loan money to each other.

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RENEE MONTAGNE, host:

This is Morning Edition from NPR News. I'm Renee Montagne.

STEVE INSKEEP, host:

And I'm Steve Inskeep. President Bush is trying again to calm the financial markets. The president spoke at the White House just a little while ago and said fear and uncertainty among both investors and the general public is making the problem worse.

President GEORGE W. BUSH (United States of America): This uncertainty has led to anxiety among our people. And that is understandable. But anxiety can feed anxiety and that can make it hard to see all that is being done to solve the problem.

INSKEEP: That's President Bush speaking a short time ago. Let's try a little harder now to define the problem that the president and others are trying to solve. The stock market is down about 40 percent in the last year, but that's not actually what most worries officials. They're more concerned that the credit markets have frozen and they say until the markets unfreeze, the economy will keep melting down. NPR's Adam Davidson visited the frontlines of the credit crisis.

ADAM DAVIDSON: Tradition Asiel Securities has a massive trading floor, nearly 100 men and a handful of women sitting in front of computer screens. It's in lower Manhattan right near Ground Zero and these guys like, Will Aston-Reese, have no doubt about how important their jobs are.

Mr. WILL ASTON-REESE (Vice President of Money Market Sales, Tradition Asiel Securities): This is the pump right here. You hear about priming the pump. Money flows for the banking system.

DAVIDSON: The pump of the U.S. economy.

Mr. ASTON-REESE: The pump of the U.S. economy.

DAVIDSON: The pump of the world economy.

Mr. ASTON-REESE: Yes.

DAVIDSON: In normal times, meaning before three weeks ago, these guys were the middlemen when one bank wanted to borrow money from another. They call Tradition Securities and ask them to put the deal through. A billion dollar loan was routine. At this desk and a handful of others around Wall Street, trillions of dollars used to flow from one bank to another everyd ay.

Mr. STEVE MORANO(ph) (Tradition Asiel Securities): Joe, count them up. Count them up. Give me a quick count.

DAVIDSON: Will's boss, Steve Morano(ph), points out the board that lists the banks, all of them huge, famous banks that are looking to borrow money.

Mr. MORTANO(ph): How many?

Unidentified Man: Forty-five.

Mr. MORTANO(ph): Forty-five.

DAVIDSON: Forty-five banks have called you and said, we need money?

Mr. MORTANO(ph): Right. And how many do you see on the right?

DAVIDSON: Zero.

Mr. MORTANO(ph): So, 45 banks need money, zero banks have money.

DAVIDSON: That right there on a white board in an office four stories above Greenwich Avenue, that is the financial crisis. Forty-five banks can't borrow money. That means 45 banks can't lend as much money to you or your boss or your corner store. That is how this crisis moves from Wall Street to your street.

Mr. ASTON-REESE: It's hard to sit in, you know, a de facto temple of capitalism, begging for a socialist solution to the problem.

DAVIDSON: Aston-Reese, says these guys here, these traders, they are the last ones to want government help. But they need more. Nothing so far has worked. This interbank lending froze three weeks ago. The government guaranteed money markets to help out. That did nothing. And the bailout finally passed. That did nothing. Then on Tuesday, the Federal Reserve directly offered to buy short term loans. No help at all. Will and Steve can't remember their last trade. It was at least three weeks ago. But just yesterday, there was a flitter, just a hint of a thaw.

Mr. MONTANO(ph): We heard of a few billion trading to various European names.

Mr. ASTON-REESE: You're stuck in the ice and you just see the tiniest crack, that sort of thing.

Mr. MONTANO(ph): We didn't do trades so we don't know the sizes, we don't know the names so we don't, we just heard stuff trading.

Mr. ASTON-REESE: So you didn't even see your ice crack, you heard a rumor that someone's ice might have cracked.

Mr. MONTANO(ph): Wall Street is a one big game of a telephone. It could have been a 50 million trade that by the time it got to us, it turned into a billion.

DAVIDSON: Word of that maybe big, maybe small, maybe not at all rumored trade came and went briefly on Thursday. Since then, the markets have been locked up solid. Adam Davidson, NPR News, New York.

INSKEEP: He's one of the voices helping us to explain the unexplainable. And you can hear an extended interview with the traders and a lot more on the crisis on our 'Planet Money' blog and podcast at NPR.org/money.

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