It’s issues right now are due to the commercial paper market. No finance company is immune from a credit cycle.

GE Capital will not need a bail out. It’s balance sheet is strong and currently undergoing defensive changes to weather the worst of the storm yet to come.

And the article I think you referenced said “In return, the Government will insist on putting its own representatives on the banks’ boards and require them to reopen lending to small businesses and restrain bonus payments.”

And -again- we don’t hear the same from U.S. ‘authorities’.

IIUC, the U.S. ‘authorities’ will get non-voting stock so as to avoid any possible appearance of “progressivism.”

What I’m wondering about is this “including forcing the banks to start lending again. From the Times Online

How will such be ‘forced’ given that the Bank of England has been injecting liquidity(cash) to these banks and ,aside from overnight lending occasionally, they have not been lending to each other for the short term credit markets?

I saw this
and found this most interesting because of the reluctance of Paulson/Bush to do the same thing; “That would mean it could take board seats and control dividend payments at both companies, the newspaper said.” And the article I think you referenced said “In return, the Government will insist on putting its own representatives on the banks’ boards and require them to reopen lending to small businesses and restrain bonus payments.”

And -again- we don’t hear the same from U.S. ‘authorities’.

The article also says this -”if investors do not answer the call to buy shares”- which we haven’t heard from the U.S. authorities, only crap about buying ‘common stocks’.

“The Chancellor will also offer government guarantees on interbank lending, a key part of the financial system that has virtually dried up.The scale of the nationalisations dwarfs the rescues of Northern Rock and Bradford & Bingley and represents a potentially huge risk for the taxpayer. In return, the Government will insist on putting its own representatives on the banks’ boards and require them to reopen lending to small businesses and restrain bonus payments.”

http://business.timesonline.co…..932250.ece

Usually LIBOR is not a lot higher than the Fed Funds rate (or the central bank rate of your choice). The fact that it is right now means there must be a reason for it. The current reason most people go with is counterparty risk – ie. lend to a bank, and they might default.

The other option is that banks are lending quite a bit above Fed Funds rates because inflation is far far above Fed funds rate.

Per this diary, http://oxdown.firedoglake.com/diary/655

“Are Central Banks Making Libor WORSE?”

Click on the chart to expand it and see who the banks are that report to the British banking Assc. that sets LIBOR.
“This also means the market’s new favorite idea of having G7 countries guarantee all inter-bank loans will do nothing. If enacted, banks would still be missing an incentive to use the inter-bank loan market because they can get all the funding (loans) they need from their neighborhood central bank and at a much lower rate.”

AND, PLEASE, read the comments associated with the above link for more understanding/education.

It appears to me that funds may be largely flowing around and past interbank loaning, thereby making their numbers divergent and perhaps meaningless.