While European Union's biggest economies prepare to prop up banks, according to the Wall Street Journal, banks are scoooping their money out of mutual funds in India, reports The Telegraph newspaper in Calcutta (Kolkata.) Indian banks' exposure to mutual funds had gone down by 86 percent by the end of last month following the Wall Street meltdown compared to a year ago, it adds.
Mutual funds have been so hard hit they have asked the Indian central bank for short term loans to pay investors, reports Reuters. The Reserve Bank of India is considering the proposal to let mutual funds deposit some of the short-term bank debt they hold with the central bank in exchange for cash, it says. Central bank repurchase facilities are normally only open to banks, the report adds. Reserve Bank of India Governor D Subbarao has mooted a debate on whether insurance cover provided to bank deposits should be extended to money markets and mutual funds in a crisis situation, reports the Press Trust of India.
"It is a vast symbolic meltdown," mourns the Washington Post in Nightmare on Wall Street. "Doubt has crept into the exchange. The consequences are real for all too many people, but what is unravelling is a huge abstraction that represents wealth that may never have really existed… Most people who invested their retirement savings in Wall Street did so as the safe, prudent, responsible thing. Mutual funds were just like Grandma putting money under the mattress."
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