UK unveils bank rescue as stocks continue slide ( 62 Views )

1. Britain unveiled a $87.4 billion rescue package for its battered banking system Wednesday as global stocks prices continued to crumble under the weight of the unrelenting financial crisis. Despite the announcement to inject cash and free up lending, European indices opened down sharply, following brutal losses in Asia that saw Japan's Nikkei plummet more then 9 percent in its largest single-day decline ever. New crisis measures by the U.S. Treasury and Federal Reserve on Tuesday failed to stem hemorrhaging on Wall Street, with the Dow Jones index experiencing a 500-point drop that knocked it to a five-year low. There were across the board declines in Asia: Sydney's All Ordinaries index fell 4.96; Japan's Nikkei was down to another five-year low at 9.38 percent and Hong Kong's Hang Seng dropped 5.38 percent -- even as the territory announced it would lower interest rates a full percentage point.
   
   In Jakarta, a 10 percent plunge on the Composite index resulted in markets being slowed to halt the decline. Other falls included South Korea's KOSPI at 6.2 percent, the Taipei Weighted at 5.8 percent, India's SENSEX was also down heavily in early trading. Europe appeared to be following suit, with Russia's major markets off more than 10 percent before trading was suspended -- now a regular occurrence -- and other indices dropping substantially. London's FTSE index recorded early losses, but banking shares were up following news that the British Treasury's was making £25 billion available to six major financial institutions with another £25 billion available if needed. Britain's Prime Minister Gordon Brown called the move a "bold and far reaching solution" for "extraordinary times," insisting that the measure, which will be paid for by British taxpayers, will "put the British banking system in a sounder footing." Finance Minister Alistair Darling said the move would "send a clear message" that it can step in and help the financial industry amid the global economic crisis that exploded following the collapse of the U.S. sub-prime mortgage sector. A day earlier, European Union finance ministers meeting in Luxembourg agreed to raise the minimum guarantee for bank deposits across member states. The meeting took place as Iceland seized control of its second largest bank Tuesday and UK bank shares fell sharply, despite strong gains on stock markets in London, Paris and Frankfurt. French Finance Minister Christine Lagarde said EU finance ministers had agreed to raise the minimum guarantee of bank deposits to €50,000 ($68,600) across all EU member states. Watch what the EU plans The amount was less than had been expected but Lagarde said the figure was agreed on to enable smaller EU countries and economies to meet the minimum.
   
   Meanwhile, U.S. Federal Reserve Chairman Ben Bernanke said Tuesday that the global financial crisis is likely to restrain the U.S. economy well into 2009. But he added that the unprecedented steps taken by the U.S. Treasury Department and the Fed were done in time to prevent more expensive and permanent damage to leading financial institutions. As Bernanke spoke to a meeting of U.S. business leaders, the Federal Reserve announced a new program to help short-term business loans -- taking its closest step yet to lending directly to businesses. The intervention came as the Treasury Department scrambled to put in place a $700 billion bailout of the financial system enacted on Friday.
   
   Under that program, the Treasury is expected to purchase troubled assets from banks and financial institutions in an effort to spur more lending. Under the program announced Tuesday morning, the Fed will purchase three-month unsecured and asset-backed commercial paper directly from eligible issuers. The program is slated to expire in April 2009.
   
   (levent, Turkey)

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