U.S., Europe Plan To Bail Out Banks

Paulson Pushes For Purchase Of Bank Stock While Euro-Zone Countries Move To Temporarily Guarantee Bank Refinancing

(CBS/AP)  Treasury Secretary Henry Paulson called for coordinated, international steps to deal with the global financial crisis, warning a meeting of the world's financial leaders that isolation and protectionism could deepen problems.

"Although we in the United States are taking many extraordinary measures to ease the crisis we are not pursuing policies that would limit the flow of goods, services of capital, as such measures would only intensify the risk of a prolonged crisis," Paulson said Sunday.

As the International Monetary Fund and World Bank held their annual meetings over the weekend, Paulson warned the bank's policy-setting committee of the dangers of "inward-looking policies."

"Financial market developments are having an acute impact on advanced economies, and we can expect the crisis to have major ramifications for emerging markets and the poorest countries as well," Paulson said. "Isolationism and protectionism will not offer a way out."

It was too early to determine whether the weekend discussions would calm jittery stock and credit markets.

But the first steps that may start to ease the crisis were taken at a meeting in Paris, where leaders from 15 European countries that use the euro as currency agreed to temporarily guarantee bank refinancing to ease the credit crunch.

Europe's leaders have rarely agreed on so much, so fast. But after meeting for only four hours, reported CBS News correspondent Elizabeth Palmer, they emerged with a plan to tackle the crisis.

French President Nicolas Sarkozy said the measure would apply through 2009 and was "not a gift to banks"

The head of the International Monetary Fund, Dominique Strauss-Kahn, endorsed the move and predicted favorable market reaction "although you never can be sure what will happen."

Strauss-Kahn also said he hoped the U.S. would take quick action to use part of a $700 billion rescue plan to purchase stocks in a wide variety of banks and other institutions, "the sooner the better."

CBS News correspondent Talia Assuras reported that experts say the process of purchasing bank stocks is much faster and more efficient than just buying up the bad debt. And speed is of the essence.

"If you buy preferred shares you can put the money in quickly," says economist Peter Morici. "You leave the process of working out the loans to the banks and, frankly, they understand that much better than the government of anyone the government would hire in New York City to do it."

"We did this during the Great Depression," Morici continues. "We are in that kind of crisis. So in my mind we should first of all recognize that the government is not nationalizing the banks and, second of all, that this is a required step to unlock credit markets."

Britain already has acted to take shares in some of its banks, and three of the largest British banks announced plans Monday to take up to $63 billion of government money to boost their balance sheets.

Royal Bank of Scotland Group PLC said it would raise $34 billion worth of capital. The government was to buy $8.6 billion of preference shares directly and underwrite $25.7 billion of ordinary shares.

The government was to inject a further $29.2 billion into Lloyds TSB Group PLC and HBOS PLC, two banks that are in the process of merging.

Outspoken billionaire investor George Soros told reporters on the sidelines of the IMF-World Bank meetings that the crisis was the worst in his lifetime. He said that financial regulators "have been consistently behind the curve" in dealing with it, but added that "the policy direction now is much more productive than it was a week ago."

U.S. lawmakers said they expected the Bush administration to take quick action on bank stock purchases to help unlock lending. The administration has not indicated when it would announce its next steps.

Sen. Chuck Schumer, chairman of the Joint Economic Committee, said an administration proposal to inject federal money directly into certain banks, in effect partially nationalizing the banking system, "is gaining steam."

Democrats also are lining up behind a plan by the leader of the House of Representatives, Nancy Pelosi, a Democrat, to bring lawmakers back into session after the Nov. 4 election to work on a second economic relief plan.

Top Democrats are suggesting a $150 billion measure that would extend jobless benefits, provide more money for food stamps and finance some construction projects, such as rebuilding bridges and roads. It would also include a tax rebate or tax cut.

Rep Roy Blunt, the second-ranking House Republican, said he would help on a plan "that makes sense" but is not laden with huge public works projects or bailouts for states that overspent on social programs.

In another step aimed at easing the financial crisis, the Federal Reserve on Sunday approved the $12.2 billion acquisition of troubled U.S. bank Wachovia Corp. by Wells Fargo & Co. Wachovia is the latest in a string of major banks and financial institutions that have been felled by financial crisis. The Fed action had been expected.

Meanwhile, the Wall Street Journal reported Sunday that Spanish bank Banco Santander SA is in "advanced talks" to acquire Philadelphia-based thrift Sovereign Bancorp Inc. Santander already owns a 25 percent stake in Sovereign.

In Washington, the World Bank agreed Sunday to help developing countries strengthen their economies, bolster their financial systems and protect the poor against the financial crises.

Robert Zoellick, the bank's president, said the contagion affecting the global economy "has been a manmade catastrophe and responses to overcome it lie in all our hands."

Zoellick said that as the crisis has unfolded, people in the United States and Europe reacted first with confusion, then anger, then fear.

"Those natural reactions will spread around the world as the impact spreads," Zoellick said. "We need to take them seriously."

He said any prolonged tightening of credit or a sustained global slowdown could cause serious setbacks to developing countries' efforts to improve the lives of their populations. These countries are already struggling with high prices for energy and food.

"We need concerted global action now not just to deal with this crisis, but to put in place new architecture, new norms, and new oversight to ensure that this crisis never happens again," he said.

He added: "The poorest and must vulnerable groups risk the most serious - and in some cases, permanent - damage. One hundred million people have already been driven into poverty this year and that number will grow."

He said the bank and the IMF must ensure that as governments turn their attention to domestic matters, they do not step back from their commitment to provide billions in aid to poor countries.

"Aid flows must be maintained," Zoellick said. "Today's meeting of ministers was unanimous in that regard."

The head of the bank's policy-setting committee, Mexican Finance Minister Agustin Carstens, said ministers were unanimous in their view "that the World Bank had to protect the poor and vulnerable in the context of the global financial crisis." He said the Bank needs to be flexible to address the differing problems faced by poor countries and those with rapidly growing economies.

[libluv2cnsor]

Posted by daddadah at 03:58 AM : Oct 13, 2008
+ report abuse


*********

too late..the New World Order is at hand..you are too stupid and too weak to do anything about it. You wasted your chance ''creating'' conspiracy why high with your buddies in your basement..PARTY IS OVER..you are now the property of the Illuminati..your body and soul belongs to me..AND I PROMISE YOU DIE A SLOW AND PAINFUL DEATH..

(sounds stupid???that is how you sounded)

[daddadah]

Good morning America how r ya,
So now will everybody read zaparto oil on wilpekia site and maybe you all will finally without a dought .That it was not little G Bush it was the whole Bush gang going way back to his grandfather and his father, his father used his three sons too cover up more corruption more fraud more scandals more prop *** his son neil guilty of fraud his sons jed and george guilty s.n.l. all pardened by daddy bush.Still have not met a jewish person who cant see a dot weather it was for Gore or Bush/what else the Bushes robbed the money so they could rob the president seat so now the new world order speech usee by ADOLPH HITLER .CALLING FOR ONE BRAIN ONE WAY OR THE HIGHWAY TAKES PLACE .AMERICA WAKE UP THE BUSH GANG ARE TRYING TO ROB YOUR FREEDOM& your Country
GOD BLESS AND STAY STRONG AMERICA PAUL REVEER SAID IT THE BUSHES R COMING THE BUSHES R COMING?

[aztecdakota]

What! Am I the only one that watches the news? That guy Bush, bailed out the AMERICAN BANKS, last week! For 850 BILLION DOLLARS, (counting miscillaneous attachments). So we are saved, unless he just pulled another "weapons of mass destruction fiasco". How come one (or more?) of these ''saved businesses'' are throwing these huge, expensive parties? Where are they getting the money?

[egresor]

i''m not a conspiracy nut so don''t read it into this, but i was thinking how i would usher in the substancial beginnings of the NWO (new world order) and this seems to fit quite nicely.

governments will take some controls of the banks is tantamount for it''s implimentation and this certainly would qualify as that.

bush has already taken many freedoms from americans. lack of privacy and ignoring laws on surveilance and court orders. of signing statements to disobey laws legally passed and he actually signed.

the natural flow of civilizations is to join and as the world grows world economy is inevitable...without something happening. like wars.

just a thought.

[claydowner]

This meeting in Europe is a general indication of how closely interconnected our financial markets are in the global economy. Irrational exuberance has been replaced by irrational despondency in the credit markets. We are facing very serious economic problems caused by huge amounts of debt both public and national in the US. But we are not in another 1929 because the Fed has taken unprecedented measures to ensure that the markets and the banking system will not collapse. Prime Minister Gordon Brown''s plan adopted by European leaders today to purchase bank shares and guarantee bank debt should keep the credit markets from collapsing in Europe. We will probably be doing the same thing here in the US tomorrow. Overtime, this should help quell the panic for now. It is going to be a tough two years or longer before our economy has recovered from the subprime meltdown.

We need to have a massive regulatory reform for markets like hedge funds, derivatives and something called credit default swaps. All of these markets need to be assessed stiff fees for all transactions. Those fees need to support, an FDIC like, insurance fund so that the private sector has private insurance. This way Wall Street pays its own bills when its schemes go bust. This outcome would be a more equitable system for the Main Street economy. Higher capital reserves need to be enforced for these Wall Street financial institutions just like for more highly regulated commercial banks on Main Street.

[outwest6]

This crisis has really hit home, most of the posts here clearly show folks who have had to go off their meds and can''t afford good tinfoil for hats!

[missingamerica]

I saw where Mitsubishi is reconsidering being Morgan Stanley''s "white knight".

I do not blame them. They do say "One bad apple will spoil the bunch.".

And if our financial industry and the laws - and the Congressional and White House Republicans - they helped to buy are any indication, Mitsubishi risks adopting bushels and bushels and bushels of bad apples.

[donlb-2009]

We have allowed organizations like the ACLU to strip away every vestige of our Christian heritage for long enough. We are tired of them destroying our country by declaring God unconstitutional. Our nation was founded on the principles laid out by the God of the Bible and we''''re saying ENOUGH IS ENOUGH! Where there is no foundation, there are no laws and what results is anarchy brought forth by moral relativism. Their way has failed. The time has come for us to take back that which once was and let the healing begin.

Posted by StopSocialis at 09:56 PM : Oct 12, 2008


What are you advocating here, evolution or revolution? Please remember that with a revolution comes violence and killing. Perhaps even overturning the United States of America? Is this what you are advocating? If so, then I want none of it. If not, then what exactly are you saying? We are a nation of laws, and not of mob rule. Please do not forget that men and woemen died for freedom, and the ability to choose. I choose the rule of law. What do you choose?

[mikec4prez]

The key to peace is here! Michael Douglas Carlin is trying to achieve his goal of saving the environment and the economy. With his new book, %u201CA Prescription for Peace%u201D, this humanitarian is on a goal to make the world a better place. The first way to change the world is by being president, so Michael Douglas Carlin is a new candidate for president. To get more information about Michael Douglas Carlin running for president, or for his book, go to www.mikecarlinforpresident.info!

[deckardbr]

Maybe if we merge Canada, Mexico and the United States into one big country, we''ll be better off. But then, hasn''t that been the real plan all along?

[jerr11]

Another MISSION ACCOMPLISHED moment for the Liar-in-Chief!

He removed a secular dictator in Saddam and replaced him with the Iranian mullahs running the country!

So the Christians are being evicted from Mosul!

Thanks to George W Bush!!

At what cost to the country?

$3 trillion spent.

4180 Dead Americans!

The guy who gave us Iraq and Katrina is now giving us the sequel, Nightmare on Wall Street!

Heckuva job, Bush!!

[stopsocialis]

What we need is a Christian nation - the only alternative is a pagan nation. By "Christian nation," I don''t mean that everyone is forced to be a Christian or forced to go to church or to believe in God. People are free to be Buddhists or atheists. The job of government is not to convert or force conversion to any kind of faith. The job of the government is to do for the people what they can''t do for themselves. And the job of bringing people to faith belongs to the private citizens, the churches, the synagogues and the religious leaders of our nation. That separation should always be kept. What I mean by a Christian nation is a nation whose laws are self-consciously built on the laws and principles of the Bible.

We have allowed organizations like the ACLU to strip away every vestige of our Christian heritage for long enough. We are tired of them destroying our country by declaring God unconstitutional. Our nation was founded on the principles laid out by the God of the Bible and we''re saying ENOUGH IS ENOUGH! Where there is no foundation, there are no laws and what results is anarchy brought forth by moral relativism. Their way has failed. The time has come for us to take back that which once was and let the healing begin.

[stopsocialis]

Restoring America:

The future of America will either be a national revival or it''s total destruction. We''re on the edge now of real national self-destruction. The past few generations of Americans have witnessed the collapse of moral and ethical values unlike any time in our history. We''re looking at the very strong probability of economic collapse, unless there is a tremendous change. We''re going to spend ourselves, tax ourselves into total oblivion.

If my people, who are called by my name, will humble themselves and pray and seek my face and turn from their wicked ways, then will I hear from heaven and will forgive their sin and will heal their land. [2 Chronicles 7:14]

The essence of what God is requiring of the Christians in America is repentance. If we Christians think that simply by political involvement we''re going to turn the country around, we''re crazy. If we think that we can adopt an antagonistic triumphalism that says we''re going to get organized and throw all the bad guys out and take over, we will be brought face to face with our own sinfulness.

We must recover the original American vision and we must put into practice 2 Chronicles 7:14. Our First Continental Congress understood this concept as is evident in the words of John Jay.

[samthetvcat]

Markets are up in Australia :)

[albertw40]

Isn''t it sad that it didn''t occur to George W. Bush until the last 100 days or so of his term that we all need each other? His "go it alone in the world" attitude has been a real hindrance over seven and one-half of his eight years.

[staplesla]

No one is solving the underlying problems. This won''t do anything in regards to the upcoming poor holiday retail sales, poor travel season, poor earnings reports, and the auto/airline crisis. All of these will continue to add to the woes of this country.

We should have a New Deal, but this time for energy alternatives. It would create jobs and reduce our dependence on other countries.

[samthetvcat]

I was thinking of wading back into the market on Friday, but over the weekend I got scared again.

I thought the meeting of the world leaders would help reassure people, but then more and more info keeps coming out about how bad the situation really is with those trillions of derivatives, and how there''s the danger of countries in an effort to look out for themselves might unintentionally adversely impact other countries which totally wigged me out.

Hopefully other people feel differently . . .