Missing the point?

October 8, 2008

Economic Stock Market collapse hits UK, Europe as well

U.K. to Inject About $87 Billion in Country’s Banks  
 
 Oct. 8 (Bloomberg) — Prime Minister Gordon Brown’s government will invest about 50 billion pounds ($87 billion) in an unprecedented step to prevent a collapse of the U.K. banking system.  As part of the plan, the government will buy preference shares, and the Bank of England will make at least 200 billion pounds available for banks to borrow under the so-called special liquidity plan, the Treasury said in a statement today. The government will also provide a guarantee of about 250 billion pounds to help refinance debt.  The steps to partially nationalize the banking industry provide “the necessary building blocks to allow banks to return to their basic function of providing cash and investment for families and businesses,” Chancellor of the Exchequer Alistair Darling said today.  The worsening credit crisis has forced the U.K to join the U.S., Ireland, Iceland, Belgium and Spain in rushing out untested bailout measures to save their largest banks. Edinburgh-based Royal Bank of Scotland Group Plc and HBOS Plc, Britain’s biggest mortgage lender, surrendered more than half their market value this week as investors lost confidence in their ability to fund themselves.  The government said it will make 25 billion pounds immediately available in the form of preference shares and stands ready to provide an additional 25 billion pounds. The amount available to each bank will vary and will depend on their dividend payouts, executive pay policies and will require the banks to lend to small businesses and home owners, the government said.  `Blanket Guarantees’  “These measures are better than blanket guarantees, which don’t change the behavior of banks,” said Peter Hahn, a fellow at the Cass Business School in London and former managing director of Citigroup Inc. “The taxpayer has direct exposure and direct control on the banks, which is a good thing. Darling has got it right.”  The latest U.K. steps come after the government nationalized Northern Rock Plc and Bradford & Bingley Plc this year and arranged the takeover of HBOS. Darling and Brown are trying to prevent the financial-services industry, which accounts for about a fifth of the London economy, from collapsing under the weight of the global credit crunch. President George Bush approved a plan last month to spend $700 billion buying distressed assets from banks.  U.K. financial service companies will cut 12,000 jobs before year end, a third more than in the same period last year, Britain’s biggest business lobby group said Sept. 29.  Participating Banks  Besides RBS and HBOS, Abbey, Barclays Plc, HSBC Holdings Plc, Lloyds TSB Group Plc, Nationwide Building Society and Standard Chartered Plc are eligible under the U.K. plan.  Most British banks fell today. Barclays dropped 13 percent to 247 pence at 9:20 a.m. in London, and RBS lost 4.4 percent to 86 pence. Lloyds TSB declined 6.8 percent, and HSBC, which said it has no current plans to use the government proposal, slumped 4.3 percent. HBOS rose 21 percent to 114.4 pence at 9:10 a.m. http://www.bloomberg.com/apps/news?pid=20601087&sid=a3cQlOZYuQJ0&refer=home

 

Similar concerns are being raised in Canada even about Canada’s Prime Minister’s lack of concerns, actions on these issues. 

Harper’s disclosure of central bank plans ‘unusual’ Globe and Mail, Canada –  TORONTO — Conservative Leader Stephen Harper took the unusual step yesterday of alerting the markets to the fact that Canada’s central bank would be taking
Bank economists predict: ‘worse than a recession’ CTV.ca
Harper Encourages Coordinated Action on Credit Crisis (Update3) Bloomberg
Markets plunge on recession fears, banking crises Canada.com
New Brunswick Business Journal – CTV.ca
all 408 news articles »
 
Harper offers policy, not an empathetic ear for Canadian concerns Globe and Mail, Canada – The sweater Stephen Harper pulled over his head for a series of commercials at the beginning of this election campaign was supposed to show him as a
Aloofness is Harper’s worst enemy Vancouver Sun
Dion argues Conservative plan ‘too Winnipeg Sun
Harper knows best Ottawa Citizen
Winnipeg Sun – Globe and Mail
all 128 news articles »
 
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