Risk aversion also adds to interest rate costs on short term bank loans, and with Russia considered a risk investment, loan costs inevitably rise.

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To prevent volatile currency swings, he argues, governments should impose a tax on short-term capital flows especially short-term bank loans.

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He says he has to rely for financing on short-term bank loans at high interest rates instead of on longer-term bonds.

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News Corp. was loaded with short-term bank loans.

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The London interbank offered rate, the rate banks charge each other for short-term loans, soared in recent weeks despite central bank injections of hundreds of billions into the system.

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Supervisors on both sides of the Atlantic concluded that the bank's heavy reliance on wholesale markets (very short-term loans from companies and other banks) left it especially vulnerable to running out of money when confidence collapsed.

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U.S. money-market funds that provide short-term credit to European banks will suffer major losses (about one third of their bank loans are in Europe.) And the operations of big U.S. companies that hold European bonds, or rely on short-term credit, will screech to a halt.

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