The emphasis of the U.S. Treasury’s $700 billion economic stabilization fund shifted yesterday from adding liquidity to merely maintaining the status quo and preventing large banks from failing.
With such a large fund as a backstop, the banking industry has already become complacent about the possibility of more failures. “There’s the perception that the government will not allow another bank to fail,” said Marc Heimowitz of Citigroup Global Markets at a conference in New York today (quoted in a Reuters story about possible failures at hedge funds and GM).
Of course, when Wall Street says there won’t be any more bank failures, they are not counting banks like the three that failed in the last two weeks. Nevertheless, no bank failures were announced tonight, so those who want to believe the run of bank failures is over can continue to believe that, at least for today.