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Special Coverage

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Banks interventions: Trying to settle down global uncertainty

Tue, Sep 30 2008, 12:50 GMT
by Marina Schiaffino

FXstreet.com

Desperate cases call for desperate measures and we are living the most uncertain times ever seen in the global economy. On FXstreet.com we have prepared a special overview of the crisis to help you know what's going on over the world.

Summary

• Central Banks' injection of money
• State interventions in private banks
  
• Stocks and the crisis
• What do the Governments think?

Central Banks' injection of money

The biggest central banks are tightening their efforts to bring back to life the stalled global financial system, through millionaire injections of money.

This crisis started with the collapse of the US subprime mortgages about a year ago. Then the Fed announced an expansion of USD330.000 million in its swaps, trying to boost markets liquidity.

That measure is added to the swaps conceded by the ECB and eight other central banks, going from a total of USD290.000 million to USD620.000 million.

The BoE injected GBP40.000 million in 3-month funds trying to improve market conditions after a weekend of bank failures in Europe and in the midst of the Bailout Plan negotiations.

Following the same trend, the BoJ has been injecting money in its banking system for 9 days in a row for a total of JPY1,5 trillion.

Related Reports

• Weekly Forex Signals - Euro hits 10−day low vs dollar as banking crisis spreads by Finotec Group Inc.
  
• Economics Weekly - Despite the credit crisis, debt accumulation still on going in the UK by Lloyds TSB Financial Markets
  
• Weekend Analysis - Government Intervention Saves Market by SwingTradeOnline.com
• European Market Update - European Central banks announced additional liquidity operations to ease quarter-end pressures by TradeTheNews.com
• Forex Analysis on Majors - EUR falls with positions correction by British banks by Forex Ltd
• Daily Forex News - Forex - Dollar get support from news Buffet 5bio in Goldman Sachs and extended Federal Reserve swaps lines to Central Banks by ACM - Advanced Currency Markets
• Special Coverage - Central Banks move its forces to beat the global (US) problem by FXstreet.com

Related News

• EIB plans 550 million pound tap -IFR (Thomson Financial News)
• Europe Central Banks Race To Smooth Bank Liquidity Wed (Dow Jones)
• Bank of England policymakers' recent comments (Thomson Financial News)
• BoE's dollar auctions find muted demand (Thomson Financial News)
• BOE: To Offer To Drain GBP10 Billion In Special Overnight Fine-Tune (Dow Jones)
  
• ECB lends $50 bln in overnight funds at 3.25 pct (Thomson Financial New)
• Sweden says bank crisis law to be in force in 2010 (Thomson Financial News)
• Riksbank's Rosenberg stepping down at year-end (Thomson Financial News)
  
  

State interventions in private banks

The Washington Mutual (WaMu) bank starred as the biggest collapse of a financial institution in the history of the US. The government takes control of the entity that holds 307,000 million dollars in assets and agrees on an emergency sale to JP Morgan.

More recently, on September 25th, the financial group Fortis has been forced to accept a EUR11.200 million injection from the governments of Belgium, Netherlands and Luxembourg after talking with the ECB president Jean-Claude Trichet in order to prevent one of the 20 largest banks in Europe from getting buried by the crisis too.

Also helped by the European banks the Belgian-French bank Dexia was propped up with public money by the governments of Belgium, France and Luxembourg which injected EUR6.4 billion in cash.

In UK, the government nationalized the mortgage lender Bradford & Bingley, while it sold its branches and deposits to the Spanish bank Santander.

On the other hand the German mortgage bank Hypo Real Estate reached a last-minute agreement with a group of banks in order to receive a loan to help it resolve the funding crisis.

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• Mid-Day Forex Technical Report - Euro Dives Following Dexia $9.2b Bailout by ActionForex.com
• Market Session Snap-Shot - Asian Session - WaMu Fails and Bailout in Jeopardy by ACM - Advanced Currency Markets
• Daily Forex Technical Report - Yen Comeback on WaMu Failure by ActionForex.com
• Start the Day - Bradford & Bingley and Fortis nationalised; Wachovia in talks to be bought by Mizuho Corporate Bank

Related News

• EU approves Bradford & Bingley rescue plan (Thomson Financial News)
• Futures slide on bank contagion fears, Wachovia (Thomson Finantial New)
• EU expects Belgian notification on Fortis on Tues (Thomson Financial News)
• EU says received UK Bradford & Bingley rescue plan (Thomson Financial News)
• EU confident Dexia plan respects state aid rules (Thomson Financial News )
• EU says UK sending info on Bradford & Bingley (Thomson Financial News)
• France, Belgium, Luxembourg invest in Dexia (Thomson Financial News)
  
  

Stocks and the crisis

US Stock markets have posted the largest declines of the year on the aftermath of the U.S. Congress rejection of Bush’s bailout plan to buy toxic mortgages from failing credit institutions. Wall street experienced its worst day since 1987. Dow Jones Industrials plunged 7%, while the Standard & Poor’s 500-stock index, plunged almost 9 percent, its third biggest decline since World War II.

Today markets seem to have opened somewhat brighter on news that the White House will continue working with congressmen in order to reach an agreement on the Bailout plan, and US stocks opened higher, however, financial markets seem still troubled. Dow Jones Industrials has recovered partially from yesterday’s losses.

Related Reports

• European Market Update -  Sense of calm returns; European equities recover from opening level lows by TradeTheNews.com
• Overnight Briefing - U.S. Stocks plunge by Jyske Bank
• Weekly Forex Outlook - Crashing stocks Prompt record Bailout from US Government by Easy Forex

Related News

• Positive Q4 start for stocks on bailout hopes (Thomson Financial News)
• U.S. fed funds rate soars with other lending rates (Thomson Financial News)
• Bond market still expects bailout deal - trader (Thomson Financial News)
• European Markets Stabilize As US Stock Index Futures Rise (Dow Jones)
• TREASURIES-Fall in Europe, mkt cautiously optimistic on bailout (Thomson Financial News)
• Gilt curve steepens after Congress rejects bailout (Thomson Financial News)
  
  

What do the Governments think?

For the moment the focus is on the risks in the US. But the problems in the Euro Zone (and elsewhere) are increasing and governments are not doing much to counterbalance them.

Related Reports

• FX Briefing - US government continues to work on rescue plan by BHF-Bank
• House Republicans help send fear soaring by Interactive Brokers LLC
• Government Debt Rescue a Boon for Gold! by Money and Markets

Related News

• France says no date for EU leaders crisis meeting (Thomson Financial News)
• ECB should set rates in light of crisis-France (Thomson Financial News)
  
• UK opposition to help govt tackle financial crisis (Thomson Financial News)
• Bush says US economy needs government action (Thomson Financial News)
• Dollar has limited reaction to Bush's comments (Thomson Financial New)
• French Fin Min: Mtg With Financial Cos Was To Assess Their Needs (Dow Jones)
• Spain says its banks and savings are safe (Thomson Financial News)
• Berlusconi not worried about Italy financial system (Thomson Financial News)

Published on  Wed, Oct 1 2008, 14:52 GMT