Banks raise billions as credit crisis gets worse and liquidity is squeezed

This time its the turn of the European Banks to take the hit – and that right on their balance sheet!! Due to subprime mortgage, short-term lending is poised to rise again even as central bankers are pumping billions and billions of dollars into their businesses.

This may be summed as an ‘end-of-the-quarter‘ effect, where banks pump in a lot of cash to make their balance sheets look stable [even in the worst times] mainly to boost investor confidence and trump their competitors. Cold, hard cash is raised through a variety of processes, including international funding, and borrowing dollars from Americans (probably Federal Reserve…) and selling part-stakes (Merrill Lynch, Citigroup, Lehman Brothers did that last year to ADIA Sovereign Wealth Fund, and Bear Stearns sold itself fully to JP Morgan)