Germay Bailout 2

TOPWRAP 4-Germany insures savings amid bank rescue talks "TOLL FROM THE CREDIT CRUNCH

The banking upheaval that began on Wall Street has effectively shut down interbank and other loan markets and is seen as pushing industrialized countries toward recession. Benchmark interest rates on three-month dollar loans have been driven higher even as central banks flooded the market with cash. Overnight rates, meanwhile, have dropped to four-year lows, suggesting risk-wary banks are unwilling to lend to each other more than a day at a time.

The resulting pinch has shut down corporate access to credit as earnings fall. As companies cut back, analysts are bracing for tens of thousands of more job cuts and pressure on consumer spending, which represents about two thirds of the U.S. economy. JPMorgan and Goldman Sachs both predict that the United States entered a recession over the past week with growth expected to contract for two consecutive quarters.

Fed fund futures have fully priced in 50-basis point rate cut by the Federal Reserve this month as expectations have built that the European Central Bank could cut rates for the first time in five years.

In another sign of the stress on credit markets, California, the most populous and richest U.S. state and the largest municipal borrower, said last week it mi"

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