Credit markets remain frozen

---

From Fazle Rashid
NEW YORK, Oct 10: The stock market took another beating yesterday. The stock in Japan which had so long weathered the storm could no longer hold and plunged more than 10 per cent yesterday sending shivers through all over the global.
The Down Jones industrial average plummeted 7.3 per cent leaving it below 9000 for the first time in five years.
Despite unprecedented steps by policy makers around the world to defuse the financial crisis, fear is spreading that a deep global recession is at hand. The credit markets, the heart of the financial system, remained in near paralysis, the New York Times (NYT) reported today.
President Bush has invited the finance ministers of the Group of Seven (G7) nations for a meeting in the White House on Saturday. There have been frantic phone calls among G7 leaders. A coordinated response is also likely to emerge at the end of the joint IMF and World Bank meeting being held in Washington.
With credit markets still frozen and stock markets around the globe in a deep swoon, there is a growing con sensus that the crisis is now so fast moving and harmful to the global economy that it demands an unprecedented degree of worldwide coordination, analysts said.
In the past six trading days Down Jones has plummeted 20.8 per cent. Oil giants Exxon-Mobil, Chevron, automaker giant General Motors suffered losses, the oil giants loss was 12 per cent each . GM's loss was similar.
The continual decline in the financial market has threatened the insurance companies as well. The insurance companies would soon need a similar round of cash infusion and recapitalization to keep them afloat. Insurance stocks have plunged more than 30 per cent in the past five days with prestigious Prudential Financial reporting a 10.2 per cent decline in its share price. Also to suffered loss are Hartford Financial Services and MetLife.
Morgan Stanley the beleagured bank which is seeking aid from the Mitsubishi is not sure about what future awaits it. Mitsubishi is said to be in two minds now whether to provide cash to Morgan Stanley or not.
Spending has to resume to put the US economy on the right track. Consumers cut on their spending is reportedly the lowest in 17 years. The USFederal Reserve and Congress are pushing to pass a $1.0 trillion finance package to repair America's financial system and encourage spending. It was not clear whether $1.0 trillion was in addition to $700 billion rescue package already approved.
We have to prop up consumption to resurrect the economy. The new package would far greater than the $60 billion bill stimulas package the House passed in late September", the law makers asserted.
Meanwhile, the gradual fall of the oil has prompted many countries to lower the price. Bangladesh is also contemplating a slash in price. The OPEC , the oil cartel, has convened an emergency meeting on Nov 18 to consider cutting the output in an attempt to arrest the 41 per cent drop in oil price in last three months.
The OPEC members, Iran and Venezuela have stated they would not allow the price to fall below $100 a barrel. Saudi Arabia, the largest oil producer may reverse its earlier position to let the market determine the price in view the current global financial crisis. The financial market will not come back to its old days. This is not going to come back. This is going to be a long one. "We are not going to see returns like we did in the past", a Wall Street watcher observed.
Recapitalising the banks and jump-starting their lending are at the top of the remedial list that many economists are now suggesting.
The Managing Director of the IMF Dominique Strauss-Kahn warned countries against taking actions that could destabilize the financial systems of their neighbours. Unilateral actions have to be avoided if not condemned, the IMF chief said.
The direct injection of cash would be for comparatively healthy banks. If a bank is failing and needs to be rescued or shut down, the Federal Deposit Insurance Corporation would handle it through its own procedures.