Figures 7A and 7B display data for the interest rate on commercial paper with a maturity of 90 days for financial and non-nancial corporations2 . These figures show that, during the financial crisis, this interest rate has risen for financial institutions and has barely budged for non-financial institutions with a AA rating. It has risen fairly dramatically for non-financial corporations with an A2/P2 rating. Note that, even though the interest rate for financial institutions has risen recently, it is still well below the levels that prevailed from the beginning of 2006 to the middle of 2007. These figures show that the financial crisis has not led commercial paper rates to rise to levels well beyond historical levels. Taken together, Figures 6A through 7B show that the third claim is false, at least as of October 15.
“We knew we were witnessing history, but at the same time, we were haemorrhaging,” he wrote in a piece for The Spinoff marking the crash’s 10th anniversary. “I vividly remember traders screaming, ‘The market’s broken! I can’t get a price, any price!’… The fear of contagion crippled financial markets, and each bank was asking the same question of the other: ‘what dodgy exposure do you have?'”
BTW, what Kerr really said:
We knew we were witnessing history, but at the same time, we were haemorrhaging. I vividly remember traders screaming, ‘The market’s broken, the market’s broken! I can’t get a price, any price!’. Screens and keyboards were smashed, and millions were lost. I still to this day struggle to believe the so-called ‘major banks’ refused to deal with each other. The fear of contagion crippled financial markets, and each bank was asking the same question of the other: ‘What dodgy exposure do you have?’ The market for bank bills, the short-term pieces of paper (IOUs) that banks buy off each other and which account for a large part of their funding, froze. An interest rate that was ‘always’ 7bps (percentage points) above the cash rate (OCR) sudden became 180bps above cash. That’s banker talk for ‘bloody hell, the cost of everything we do has just blown out’. Credit, the availability of money to do stuff like buy a home, is the oil in the economic engine and when it dries up the engine seizes. What we had was a recession, and it was a bad one. Bailouts came in a number of forms but many feared it wasn’t enough. (emphasis by this blog)
BTW, one basis point (BP) is one hundredth of one percentage point, not a whole percentage point as the editor of his article suggested.