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U.S. may need to insure wholesale deposits: Barclays Capital
Reuters
Thursday, Nov 13, 2008
“The markets are still unwinding the damage from Lehman.”
He said the commercial paper market lost $200 billion in two weeks after Lehman collapsed as investors turned to safer government paper, and even after two months private investors are still reluctant to return to the commercial market.
“If you look at the commercial paper market today, it’s improved mainly because the Federal Reserve is buying commercial paper,” Kantor said. “There is still a dearth of private buying of commercial paper.”
Kantor said institutional investors were not willing to leave their money with counterparties, which suggests more measures will be needed to restore confidence.
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“In my mind we need some kind of insurance for wholesale depositors, just as we needed insurance for retail depositors,” he said, adding investment banks want their commercial obligations to be fulfilled even if the counterparty bank collapses.
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