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Wednesday, October 8: The financial structure has changed. Looking into the black hole

What now is the model for hedge funds, finance companies and the former users of the securitization markets?

The week Wall Street capitulated

"The financial structure has changed, ending credit-led financing and disintermediation, and into a funded model"

Wednesday, October 8: The US Treasury hints it is considering injecting capital into banks

Wednesday, October 8: The US Treasury hints it is considering injecting capital into banks

For the first time, US Treasury Secretary Paulson opens up the possibility of government directly injecting capital into financial institutions. As ever, it is all talk and no action. The tailspin continues... The day started with meetings with two US mortgage market specialists. "We don’t know what the endgame is," one said with brutal honesty. The other pointed out that the rate at which US household debt fell in the second quarter was outright deflationary. And that leverage in the non-financial sector was increasing. Net debt had fallen in the period from 2002 until 2006 but 2007 was a record year for gross corporate issuance. Now these institutions were tapping their credit lines.

At another encounter, the same bank’s chief economist noted the momentous backdrop.

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