Photograph outside Morgan Stanley's Times Square headquarters by Mark Lennihan/AP
Wall Street is poised for a rally as central banks around the world--from the U.S.'s Federal Reserve to the European Central Bank and Bank of Japan (and others)--put more cash into the markets. Per the NY Times:
The Fed said in a statement that it had authorized a $180 billion expansion of its temporary reciprocal currency arrangements, known as swap lines, to allow banks to borrow more dollars in markets at a lower rates...
The Fed also authorized increases in the existing swap lines with the European Central Bank, up to $110 billion from $55 billion, and the Swiss National Bank, up to $27 billion from $15 billion.
New swap facilities were established by the Fed with the Bank of Japan, for $60 billion; the Bank of England, for $40 billion; and the Bank of Canada for $10 billion.
Barclays' chief European economist Julian Callow said, "This is clearly a very significant help and central banks are showing decisive leadership here as risk aversion is hitting the private sector." Asian stocks fell, but European stocks gained upon news of the cash infusion.
Still, the Wall Street Journal, dubbing this "Worst Crisis Since '30s, With No End Yet in Sight," said the crisis "has entered a new, far more serious phase," noting the problem is beyond just subprime mortgage and there's a "growing sense of wariness about the health of trading partners."
Speaking of health, Morgan Stanley--"one of the two last independent U.S.-based investment banks"--is reportedly talking to Wachovia about merging. Morgan Stanley is also looking to raise cash from a Chinese bank. And Washington Mutual will put itself up for auction. The NY Times has an article about how Morgan Stanley and Goldman Sachs stock, in spite of reporting "respectable profits," fell almost 25% and 14% respectively, "underscor[ing] how quickly a sense of fear is spreading through Wall Street."
