Repo pullback from troubled European banks

The New York Times reports today that “American financial institutions…are increasingly wary of making new short-term loans in some cases and are pulling back from doing business with their European counterparts.”

In response, says the NYT, “New credit lines have been opened by the European Central Bank for institutions that need funds.” This gets back to what Simon Johnson and Peter Boone wrote about in July that European repo policies were exacerbating financial difficulties in the Eurozone by treating most credit equally.

Unless European authorities take some real action soon, the likelihood of a broader European financial crisis is increasing.

The New York Times article is here.

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