Wall Street's Financial Crisis Is Felt Worldwide
The financial crisis on Wall Street is felt worldwide, particularly in Europe.
LONDON, Oct. 2, 2008 -- While the world waits to see what the U.S. House of Representatives will do about the proposed $700 billion bailout plan, European countries have quickly moved to stop the bleeding by enacting a series of their own bailouts.
On Wednesday, the U.S. Senate passed a revised version of the bailout bill by a 74-25 vote that included raising the FDIC insurance limit in an effort to win the House's approval. The House is expected to vote on the bill by Friday.
Hoping to sharpen Europe's role amid the Wall Street debacle, French President Nicolas Sarkozy has called for widescale support of European banks ahead of a financial summit he has arranged that will include Britain, Germany and Italy.
"We must not give way in the face of destabilization, we must help our banks," Sarkozy said.
Justin Urquhart Stewart of Seven Investment Management says the European markets are "absolutely dependent" on what happens with the $700 billion plan from Washington.
As European financial markets deal with the aftermath of Monday's nightmare on Wall Street and the House rejection of the proposed bailout plan, the Paris summit is expected to bring the major European players together this weekend in pursuit of solutions to the global economic crisis.
In the United Kingdom, the British government has undertaken a series of measures to stabilize its financial markets. In a move announced Monday, the U.K.'s ninth largest mortgage bank, Bradford and Bingley, will be nationalized, after a loss of investor and lender confidence caused it to succumb to the financial crisis. Bradford and Bingley is the second U.K. bank to be nationalized, after the British bank Northern Rock was taken over in February.
In Ireland, the government has moved to guarantee bank deposits, bonds and debts in its six largest banks for the next two years, but there are concerns that such a move will give Irish banks an unfair advantage.
"It's not that it's unfair, but it's causing distortion," Stewart said, referring to the Irish government's guaranteeing 100 percent of deposits while other countries are not.
The European Union's Competition Commissioner has been in "close contact with Irish authorities" as the EU looks to determine if the Irish move is in compliance with its competitive rules, according to published reports. The United Kingdom is reported to have voiced its concern to the European Commission fearing the Irish deposit guarantees could hurt U.K. banks by making Irish banks more attractive.
Ireland's president has since signed the measure after lawmakers approved it on Thursday.
In Germany, the government and top banks pushed funds into mortgage lender Hypo Real Estate, in what was the fifth bailout of a German bank in the midst of the financial crisis.
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