August 24, 2007 (LPAC)--The amount of unsold "leveraged takeover debt" on the books of major banks--which may have to "eat" that debt themselves with major losses--has reached $325 billion, with nearly $200 billion on the books of a dozen or so investment banks according to a JP Morgan Chase report. Reuters news service today quotes a number of bank economists saying that there will be no more leveraged takeover deals for at least six months, probably longer. The banks cut off lending to private-equity "takeover funds" about a month ago, but Wall Street had been claiming this freeze would end in September.

But the worse the mortgage securities meltdown gets, cutting credit to hedge funds, the commercial loan market, etc., the more squeezed are the banks. "We're in the midst of a major, major credit crunch," Reuters quoted an investment banker at a large commercial bank, who requested anonymity. "No LBOs as we've come to know them will be financed for the remainder of the year." Another banker at a major investment bank agreed: "I don't think there will be any significant LBO activity for at least six months."