In These New Times

“We’re right at the moment where action is needed,” warned Strauss-Kahn. “A non-perfect plan is better than no plan at all,” he added, in an interview with Reuters in Washington.

And a perfect plan for  “the sake of global finance” is even better still.

“With politicians worldwide demanding action” – this is hardly objective from the Guardian: you could go as far as to say “with certain politicians…….”

“the US Senate is due to buck convention and vote on an amended version of the rescue plan this evening – before the lower house has given its approval.” “bucking convention” is presumably a Guardian euphemism for unconstitutional action.

“it now includes a clause to raise the government’s guarantee on savings from $100,000 to $250,000.” The Guardian could have pointed out that the funds are not available to meet such a comittment.

Andrew Clark and Graeme Wearden

Guardian

1st October, 2008

The International Monetary Fund has added to the growing pressure on the US Congress to approve the Wall Street bail-out, as stockmarkets rose on optimism that a deal will be hammered out this week.

Dominique Strauss-Kahn, managing director of the IMF, warned last night that the US must take urgent steps to protect its economy from the ongoing financial crisis.

“We’re right at the moment where action is needed,” warned Strauss-Kahn. “A non-perfect plan is better than no plan at all,” he added, in an interview with Reuters in Washington.

The prospect of a deal this week sent shares up in London this morning, where the FTSE 100 continued yesterday’s bounce-back. After leaping by 92 points in early trading it slipped slightly by 11am, when it was up 48.1 at 4950.5, a gain of 1%. Asia was also more buoyant, where Japan’s Nikkei recovered some of yesterday’s heavy losses to close almost 1% higher. Hong Kong’s Hang Seng index gained 0.75%.

The House of Representatives sent shockwaves around the world on Monday when it voted down the $700bn (£390bn) rescue plan, under which the US government would cleanse the banking sector’s balance sheets.

With politicians worldwide demanding action, the US Senate is due to buck convention and vote on an amended version of the rescue plan this evening – before the lower house has given its approval. In an effort to win Congress’s backing, it now includes a clause to raise the government’s guarantee on savings from $100,000 to $250,000.

But in a sign of the problems facing the financial industry, JP Morgan warned that Europe’s banks will take fresh asset writedowns totalling €28.4bn (£22.5bn) before the end of this year

The research note predicted the following writedowns:

• Lloyds TSB (including HBOS): £4.5bn
• Deutsche Bank: £3.6bn
• UBS : £2.1bn
• Barclays: £2.9bn
• Société Générale: £2.1bn

Strauss-Kahn demanded that Europe draw up contingency plans in case its own banking system needs to be rescued. Unlike in America, there is no single regulator overseeing the system.

“Developing a contingency plan does not mean it’s announcing a lot of trouble coming. But they’re not totally immune … and so they need to organize,” he added.

But the president of the European Central Bank, Jean-Claude Trichet, has rejected the idea that Europe should organise its own bail-out.

“We are not a fully fledged federation with a federal budget,” Trichet pointed out. “Each country has to mobilize its own efforts.”

He also echoed calls for rapid action on the bail-out.

“It has to go, for the sake of the US and for the sake of global finance,” Trichet said.

Both presidential candidates have also called for a new push to get the rescue plan through.

On the campaign trail yesterday, Barack Obama warned of “catastrophic” consequences unless a deal is reached soon.

“We cannot risk another week or another month where American businesses are afraid to extend credit and lend money,” he said.

There was also renewed optimism on Wall Street that the treasury would eventually be able to hoover up “toxic” mortgage-related assets.

“Cooler heads are prevailing – we’d had a little bit of panic at the close yesterday,” said Anthony Conroy, head trader at BNY ConvergEx in New York. “There’s anticipation that some sort of deal will be passed by Congress in the next day or two.”

The US public has blamed the shambolic handling of the bail-out plan on both Congress – whose approval rating has fallen to 10% – and president George Bush, who is accused of caring about “fat cats” rather than ordinary people.

Cailean Bochanan
1st October, 2008

The congressional vote on Monday rejecting the bailout scheme was a triumph for democracy. It has sent waves of dismay through the elite unaccustomed as they are to seeing their best laid plans dismissed in this way. For the British branch of Anglo-American it seems to have been particularly devastating: Brown put everything into backing it, “whatever the details”, and stands to lose further credilibilty with its defeat. Yesterday was a day of mourning, a day for deep reflection on the blows which destiny, or democracy, can deliver to embattled oligarchs and their entourage. But it was also a day of sharp manouvering by Monday’s losers: the markets rallied with Bush’s statement, sending a clear message to dissidents that the markets would collapse if disappointed by a further rejection. And there were promises of universal insurance on all deposits, a promise that costs nothing and which we already know cannot be met. A bailout for the bankers is now being presented as a bail out for everyone: we’re all going to bail out each other!

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