Mother of all crunches

Hat tip to vtcodger for this catch:

Naked Capitalism makes a comment and uses Bloomberg:

We noted a few weeks ago that between large amounts of short term financial firm debt maturing in the third and fourth quarters, banks still leery of lending to each other, and liquidity always lower at year end (banks pull back from the market to square off their books), this November-Decemeber looks to be even worse than last year, which was bad enough to lead to emergency intervention.

From Bloomberg:

The Federal Reserve may have to increase the cash it provides to banks and brokers, already a record, to help them balance their books at the end of the year.

Six bank failures in the past two months and rising concern about Lehman Brothers Holdings Inc.’s capital levels pushed lenders’ borrowing costs to near a four-month high yesterday. They may climb further as companies rush for cash to settle trades and buttress their balance sheets at year-end.

“This could be the mother of year-ends,” said Brian Sack, vice president of Macroeconomic Advisers LLC in Washington, who used to serve as head of monetary and financial market analysis at the Fed. “The markets will need extraordinary actions to get through it.”

One option is for banks and brokers to increase the loans they take out directly with the Fed; the central bank reports on the figures today. Officials could also offer options on its biweekly loan auctions or introduce special repurchase agreements to straddle the end of the year, economists said.