Libor rate shows system distress

Lending between banks remained abnormally expensive on Friday despite emergency help from central banks, keeping the world financial system on life support and leaving markets to look for more sweeping rescue measures from the G7 meeting this weekend. Interbank lending rates have shot through the roof in recent weeks as the financial crisis gained momentum, finally pushing major central banks to complement what has been a daily emergency injection of billions of dollars in short-term loans to banks with a coordinated rate cut. But interbank lending still won't get going. The consequences for the economy could be dire. Three-month loans between banks in dollars, for example, today cost 4.82 percent, way above the Federal Reserve's benchmark rate of 1.50 percent — a difference, or spread in market jargon, of some 3.32 percent.... [read full story]