All through last week, governments and central banks around the world collectively and individually cajoled, supported, nationalized, recapitalized, and backstopped financial institutions and markets contorted by a lock-down of credit. But as this piece was written and published-to-web in advance of the Columbus Day weekend, credit remained stifled and the global equity markets unraveled even more.

The Federal Reserve started buying commercial paper. Treasury Secretary Henry Paulson strongly hinted that direct cash-for-equity injections in needy U.S. financial institutions would commence shortly, under authority provided by Congress in the Emergency Economic Stabilization Act. The U.S. may insure all bank deposits. In an unprecedented, coordinated move, the Fed, the European Central Bank, the Bank of England, the Swiss National Bank, the Bank of Canada, and the Bank of Sweden cut their rates, following a surprise rate cut by the Bank of Australia and followed by rate cuts by the Bank of China and the Bank of Korea.

The ECB will offer euro system banks unlimited liquidity at its weekly auctions. Japan is feeding its banks. The UK and Russia are plowing tens of billions into its banks. However, a Russian capital infusion and bank nationalizations failed to stabilize Iceland, which turned to the IMF for help. In the end, it was probably fear and panic and hedge fund unwinding that pushed the world’s equity markets sharply lower by the end of the week. The Dow Industrial Average closed at 8,451.49 on Friday; it lost 2,399 points in nine consecutive trading days. The Nikkei 225 Average closed at 8276.43, off 24 percent for the week. All of the European indices were trounced. 

Despite the gloom, some analysts expected a global plan addressing the credit crisis to emerge over the weekend from the G7 meeting. And the coordinated central bank rate cuts show a “strong interest in protecting the soundness of their financial systems,” according to David Levy, chairman of the Jerome Levy Forecasting Center. He expects “more aggressive actions to fight the crisis,” and believes systemic failure can be averted.

Other observers express dismay over the fractured global response to the credit freeze. “The sky is falling,” says Timothy A. Canova, associate dean and professor of international economic law at Chapman University School of Law.  “Even though the Fed is directly buying commercial paper in the open market, I don’t think that’s going to work either. When you can’t count on the Fed, who can you count on? We haven’t seen LIBOR move.” Canova criticizes the piecemeal approach of government officials: “The absence of a concerted plan is flabbergasting. The banks are just not lending, and that will continue to undermine the economies. The foreclosure crisis is bad enough—you’ll be looking at business bankruptcies next. We need a comprehensive solution.”

But Levy believes the steps taken so far have been positive. “Governments are guided by complex political animals that work in messy ways. They’ll throw a lot of energy and effort at the problem, and if it doesn’t work they’ll try something else and throw money at it.”  He lauds Fed chief Ben Bernanke for his “creative responses,” and notes that “there are a number of weapons the central banks can still pull out in this battle.”

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