Yesterday, following last week’s joint move by the world’s leading central banks, the European Central Bank up the scale of the liquidity relief to $500 billion (see Cheap Money Is ECB’s Answer – WSJ.com and E.C.B. Makes $500 Billion Infusion – New York Times). This prompts me to raise the same question I asked earlier about the Fed action: will they accept intangibles as collateral for any of this lending? As Steven Pearlstein put it this morning:
In this case, it’s not only $500 billion, but $500 billion lent against almost any collateral, including a handwritten IOU from Uncle Ludwig in Dusseldorf.
If that is the case, then lending intangibles might be a much safer bet.