The ongoing, self inflicted credit crunch, is producing an atmosphere of fear in the City. Banks and financial institutions are seeing their share prices drop, as investors fret over which one will be next to announce profit write downs and liquidity problems arising from the credit crunch.
Barclays has decided to try to grab the bull by the horns by asking its auditor, PricewaterhouseCoopers (PwC), to help with a breakdown of Barclays' financial performance for a trading statement due on November 27.
On Friday Barclays shares were briefly suspended, as a result of rumours concerning a possible writedown of £5BN.
Barclays quickly denied the rumours, and John Varley (CEO) issued an internal memo to staff assuring them that the business was sound.
Varley, in his memo to staff, said:
"If there were any substance in the rumours that I have been hearing in recent days, we would not have been required to have made a stock market announcement. But we have not."
What we are now seeing is irrational and unsubstantiated fear undermining the stability of sound financial institutions. This needs to be stopped here and now.
As Roosevelt once warned:
"We have nothing to fear, but fear itself."
The financial services industry and the regulatory authorities need to get a grip on this, otherwise what people fear will take tangible form and the financial markets will totally freeze up.