Wednesday, June 4, 2008

Potential For More Economic Woes

Growth depends on credit. The winds continue to build for the potential of an economic free fall. Everyone talks about the lag affect of Fed rate cuts. The lag is just as great for tightening credit.

Accounting changes could force US banks to take thousands of billions of dollars back on to their balance sheets in the coming months in a move that is likely to curb further their lending and could push them into new capital raisings, analysts have warned.

Analysts at Citigroup said a planned tightening of the rules regarding off-balance sheet vehicles would force banks to reconsider arrangements and could result in up to $5,000bn of assets coming back on to the books.

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