Sunday, October 12, 2008

G7: No more Lehman brothers

Whoops. I guess allowing Lehman to fail, after the Fed gave it it's tacit blessing by opening the discount window to them, is now causing such consternation in investment psychology that the G7 now says no mas.

The world’s leading industrialised nations have pledged to do everything in their power to prevent any more Lehman Brothers-style failures of systemically important financial institutions.

Experts said this remarkable commitment was the most concrete and far-reaching promise made in a weekend of international efforts to contain the escalating global financial crisis.

They said it came close to a G7-wide temporary implicit guarantee for many or all of the liabilities of systemically important financial firms.

This should in theory provide comfort to creditors holding in particular the senior debt issued by such firms. However, ambiguity as to how this promise will be implemented could limit its impact.

The G7 said it would “use all available tools to support systemically important financial institutions and prevent their failure”. A senior policymaker from an emerging market nation said this amounted to saying “no more Lehmans” – an assessment privately shared by G7 officials

The pledge reflects the belief that the collapse of Lehman Brothers unleashed the latest devastating wave of financial panic.

But if you want to read about all the guarantees, they are encapsulated in the link below. There are just too many guarantees to list when I can link:

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