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The central banks <http://economictimes.indiatimes.com/Features/Financial_Times/Central_banks_move_in_with_bail-out_packs/rssarticleshow/3614010.cms#>, world over, are pumping money into their financial systems in an attempt to contain the crisis that is now prevalent in the glo bal financial economy. The fear of it spreading to the real economy is prompting all countries to act swiftly and put out the fires. UK's Prime Minister took the lead in proposing to recapitalise banks. European Union followed suit and the US is addressing the acute liquidity issues that banks are facing right now. cWhy do banks need money ? The central banks' and government's cash infusions are attractive to banks because they are having trouble sourcing funds. Losses on mortgage-related securities have depleted banks' capital in the US and Europe. The value of these securities had eroded due to falling home prices, rising defaults and foreclosures. Due to the steep fall in the value of these securities, the banks had to reflect the marked-to-market losses in their books and balance sheets. This nearly eroded their capital and some of them have gone bankrupt too due to this reason. Without sufficient capital, banks have been reluctant to lend, causing substantial damage to the real economy and depressing economic activity. The uncertainty over how much damage the US mortgage-based investments<http://economictimes.indiatimes.com/Features/Financial_Times/Central_banks_move_in_with_bail-out_packs/rssarticleshow/3614010.cms#>will cause has made banks increasingly reluctant to lend. They felt it was safer to hold on to cash rather than lend to companies that could go bankrupt tomorrow. http://forums.investorline.co.in/ --~--~---------~--~----~------------~-------~--~----~ Get latest market updates & search internet right from your browser-download our toolbar here- http://investorline.ourtoolbar.com/ Visit our site at – http://investorline.co.in/ Newsroom: http://newsroom.investorline.co.in/ Learning Center- http://learning.investorline.co.in/ Mutual funds - http://mutualfunds.investorline.co.in/ Life Insurance - http://insurance.investorline.co.in/ Investor Journal - http://research.investorline.co.in/ Newscatcher- http://catcher.investorline.co.in/ Interested in Financial Planning-Let us Contact you- http://spreadsheets.google.com/viewform?key=pb_z4f1_zGMg4iBBFT3-SWQ&email=true If you like the site then promote it here- https://www.freetellafriend.com/tell/?url=http://investorline.co.in/blogs/news Create your own free blog on- http://investorline.co.in/blogger Visit this group at http://groups.google.com/group/india-investor -~----------~----~----~----~------~----~------~--~---
