Monday, September 29, 2008

Fire Spreads to Europe

Some of the headlines from across the Atlantic today shows that the current financial crisis is more than an American problem. Globalization means that this financial crisis cannot be confined to the United States, but could affect the entire world economy. European politicians are engaged in a very delicate balancing act right now, trying not to get sucked into the same problems that US legislators are dealing with, but facing many of the same problems.

Additionally, the European Central Bank joined with the U.S. Federal Reserve in doubling the credit swap line that makes dollars made available to cash-hungry banks from $120 million to $240 million. The Bank of England doubled dollar availability to $80 billion, while other central banks offered smaller amounts. Once again European governments are attempting to avert a growing crisis of confidence in the financial markets and the broader economic implications of the current turmoil while not returning to many of the socialist or apperance of socialist responses.

UK Government Nationalizes Bradford & Bingley

The British government on Monday confirmed it was nationalising Bradford & Bingley after hammering out a deal with the Spanish bank Santander, which will buy the embattled UK mortgage lender's £21bn deposit book and branch network for about £600m.

The bank was taken into public ownership on Monday after B&B saw retail savers withdraw "tens of millions of pounds" in recent days as uncertainty grew.

Fortis, Huge European Bank, Partially Nationalized

Dutch-Belgian bank and insurance giant Fortis NV was given a 11.2 billion euro ($16.4 billion) lifeline to avert insolvency as part of a wider bailout plan agreed to by Belgium, the Netherlands and Luxembourg, officials said Sunday.

Basically the governments of Belgium, the Netherlands and Luxembourg took partial control late Sunday of struggling bank Fortis NV.

Hypo Real Estate Gets $50 Billion in Emergency Credit

Germany's second-biggest commercial-property lender, Hypo Real Estate, will receive a 35 billion-euro ($50 billion) loan guarantee from the government and a group of banks to save it from potential collapse.

Iceland takes over Glitnir

The Icelandic government on Monday said it had taken over Glitnir, the island’s third largest bank, by injecting €600m ($862m) of equity after the lender’s funding position sharply deteriorated.

The bank rescue confirmed market worries about the ability of Iceland’s banks to withstand the current credit squeeze, given their weak base of deposits at home and their dependence on wholesale funding. Icelandic banks have increased their balance sheets aggressively in recent years to expand out of their volatile home market.

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