September 4, 2007 (LPAC)--A key Bank of England interbank lending rate has reached its highest level since the LTCM crisis in 1998, reports major newspapers in London. The three-month London Interbank Offered Rate (Libor), the rate at which banks lend unsecured funds to each other, is now at 6.74%. The Telegraph quotes one source warning of a "seizure" in the banking system, with new lending was "dropping back to levels last seen in the 1920s and 1930s."

Meanwhile, the next date to watch on the financiers' death row is September 17, which begins the week in which major investment banks start reporting their third quarter results. The Financial Times reports that "most expect the numbers to be fairly grim," citing the August freezing-up of credit markets, and the "dead stop" in leveraged buy-outs. Bear Stearns is expected to take the biggest hit with Lehman Brothers claiming that Bear Stearns profits could collapse from $3.28 per share to $1.45, with two of its hedge funds having already collapsed, and investors bailing out of others. At the same time, Merrill Lynch predicts that Lehman Brothers third quarter profits could decline to $1.29 from $1.77, because of its exposure in the leveraged buy-out game and mortgage write-downs. Goldman Sachs reportedly has the greatest dollare exposure to leveraged loan commitment writedowns.

The London Daily Telegraph quotes financial traders saying it is largely irrelevant, since lending between banks has pretty much dried up anyway.