Credit markets will be key in 2009

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Despite the infusion of cash from the federal government into credit markets during the last few months, many banks are still leery of lending money.

The financial crisis started in the credit markets, and that’s where it will end. But as 2008 comes to a close, bankers and policy makers are struggling to see the way out, according to a recent report in The New York Times.

Economic recovery in the next year will depend greatly on when and how much lending institutions are willing to loosen their purse strings.

Among the concerns is the future of securitization, a key mechanism that enables banks to bundle loans and bonds into securities for sale to investors, the article states. This market is “moribund now that many of its creations have plunged in value.”

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