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Wednesday, July 01, 2009

Banks get "A Real Free Lunch"

This from Germany. Nothing like this could happen here:

"Central banks are making trillions in unusually cheap money available to banks in a bid to restore liquidity to the financial system. But institutions are not passing on the cash to their customers, choosing instead to invest it and make a fat profit...

In the last week alone, the European Central Bank (ECB) allocated the record sum of €442 billion ($619 billion) to 1,100 financial institutions -- at a paltry 1 percent interest rate...

It seems clear that the banks would rather invest the cheap money they can borrow from central banks in safe investments, such as German government bonds offering 2.5 percent interest, than lend it to companies whose prospects, in the middle of a recession, are anything but rosy. And they are also lining their pockets with the fees they charge customers who are forced to go overdrawn as a result of the crisis."