The fallout continues from the U.S. subprime market as the impact is starting to spread around the world. In response, central banks from the U.S., Canada, Europe, Japan and Australia pumped around $136 billion into the banking system to try to shore up people's confidence in the credit markets across the world.
"They accomplished their short-term mission to make sure the market stabilized ahead of the weekend," said David Resler, chief economist in New York at Nomura Securities International Inc. "It remains to be seen how much more they'll have to do."
Another side effect from the subprime problem is money market rates have been rising across the world, showing how global investors had been pouring their money into U.S. securities backed by mortgages.
The bank actions did help turn the market around as American stocks rebounded and the U.S. overnight bank lending rate dropped below the targeted goal.
Jim Cramer Going Berserk on Market Meltdown and Money Rates
After loaning a record amount of 94.8 billion euros, the European Central Bank added another 61.05 billion euros, or $83.6 billion. The overnight rate for euros increased by 4.27 percent in response.
The central bank of Japan loaned $8.5 billion, while the Reserve Bank of Australia added $4.2 billion. Switzerland and Norway also put money into the system. Other countries say they are ready to provide cash if it's needed.
This comes after banks in Europe and Japan finally admitting the rising delinquencies on American subprime mortgages has made them vulnerable.
Just last week, as we talked about BNP Paribas SA the largest French bank, they said they weren't at risk, yet they ended up having to stop withdrawals from three of their investment funds. Germany had to bailout IKB Deutsche Industriebank AG as they revealed their losses could reach 3.5 billion euros.
Go here for an excellent indepth overview of the history and challenges of the current crisis.
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