Crisis Hits Europe's Banks As U.S. Seals Bailout Deal - Wall Street Journal

[steve2470]

http://online.wsj.com/article/SB122257682963083173.html

WASHINGTON -- The White House and congressional leaders agreed on a deal to authorize the biggest banking rescue in U.S. history. The $700 billion program would effectively nationalize an array of mortgages and securities backed by them -- instruments whose deteriorating value has clogged the nation's financial system.

Lawmakers finished writing the bill late Sunday, after which Speaker of the House Nancy Pelosi declared it "frozen," meaning no changes would be made. The bill leaves many mechanics of the operation up to the Treasury. Among these are the crucial issues of how the U.S. government would decide which assets it will buy and how it would decide what to pay for them. The legislation leaves the Treasury 45 days to issue guidelines on those procedures. The bill awaits votes in Congress starting on Monday.

From big Wall Street houses to small community banks, executives have expressed an interest in signing up for the bailout. But some have said the extent of their involvement will depend on critical details.

The political fallout from the bailout could be substantial, given the enormous expenditure of taxpayer money. Some polls show wide opposition. But the legislation includes provisions designed to guard against ultimate losses for the government. And it calls on the Treasury, as an owner of mortgage securities, to "encourage the servicers of the underlying mortgages" to minimize foreclosures.

The deal came after tension-filled weekend negotiations, where the specter of a faltering economy collided with the politics of a presidential election to create one of the biggest congressional dramas of recent years. Saturday included a high-decibel exchange between Treasury Secretary Henry Paulson and congressional Democrats, a ban on handheld email devices to forestall news leaks, and a battery of lobbying calls from the president and the presidential candidates.

more at link above

graphic below that may be useful:

[dipsydoodle]

1. I can't find any reference in the article

to European banks ? Do you think they screwed up on their own headline ?

[steve2470]

2. I cannot find the Euro banks stuff either nt

[Mojorabbit]

3. Here is one article

http://online.wsj.com/article/SB122267247915885225.html?mod=googlenews_wsj
* SEPTEMBER 29, 2008, 5:56 A.M. ET

Central Banks Inject More Cash
As Money Markets Remain Frozen

LONDON -- Central banks pumped billions of dollars in additional funds into money markets early Monday as more financial institutions ran into trouble in Europe and the U.S.

The central banks of Japan, Australia and the European Central Bank continued to work at keeping bank systems liquid after money markets remained frozen over perceptions of growing default risk.
Reuters

The ECB launched a special term refinancing operation aimed at improving the overall liquidity position of the euro-zone banking system.

The fresh injections came amid news of a string of banking rescues in Europe over the weekend. The Netherlands, Belgium and Luxembourg on Sunday agreed to inject €11.2 billion (US$16.37 billion) into Fortis NV after the Belgian-Dutch bank's shares came under heavy selling last week. (See related article.)

U.K. authorities worked late into Sunday night to finalize a government takeover of mortgage lender Bradford & Bingley PLC, in what would be the country's second bank nationalization in a year. (See related article.)

Germany's Hypo Real Estate said Monday it secured a multibillion-euro line of credit from several banks, a move aimed at shielding the commercial-property lender from the volatility of financial markets. The names of the banks, or even the amount, weren't disclosed, but Munich-based Hypo said it would be required to write down the goodwill in its stake in Depfa Bank PLC. Germany's central bank, the Bundesbank, and financial regulator, BaFin, said in a joint statement they were involved in the efforts, and expressed confidence the lender now had had sufficient liquidity.

[dipsydoodle]

4. Thanks

I knew there were other articles on the subject especially as I'm in the UK and broadly spaaking our news is always more comprehensive than the USA's. I just couldn't find any reference in the OP's one.

[K Gardner]

5. My ex told me about this last night, not sure where he found out about

it; but he's fairly well-informed and not prone to panic or over-reaction.

I've never seen him this worried. He also said that Lehman Bros was allowed to fail primarily because it was run by primarily Democrats. I hadn't heard that before, but again, I've never known him to have a partisan bone in his body so I was surprised he believed this was true.

[eshfemme]

6. There will still be people here denying the implications of letting collapse happen

They'd just be cheering the collapse of bad banks in other countries too.

Ugh, just disgusted with the whole closing of minds over something like this just because of a quick first impression that's probably false.

Nate Silver of 538.com actually had a nice blog post about the polling about support for a "bailout" because it turns out support for and against it fluctuates depending on how the situation is posed. The media's use of the word bailout has strong negative connotations that obviously elicited strong reactions while a more correct and nuanced description (impossible in the soundbite happy media) allows for more varied reactions. So yeah, bailout is probably not even the correct word anymore for the situation.