Wednesday, October 08, 2008

British bank bailout; Nikkei plunges; Global rate cut

Britain is bailing out its banks:
The U.K. government said Wednesday that it will pump as much as 50 billion pounds ($87 billion) of capital into the country's main banks as part of a rescue package designed to shore up the struggling sector. ...

The U.K. cash injection, which will be exchanged for a stake in the banks, is part of a package that also includes plans to boost liquidity and guarantee some new bank debt in an attempt to revive lending between firms.

Prime Minister Gordon Brown said the measures go much further than the U.S. deal to buy up risky assets and will give taxpayers "a share in the upside" when the sector recovers. ...

[The banks] have agreed to increase their total Tier 1 capital by 25 billion pounds before the end of the year. The government said it will make the money available to be drawn on as preference share capital or permanent interest-bearing shares and is also willing to assist in the raising of ordinary equity.

Banks are free to raise the cash without government help, but that's going to be hard for most firms given the state of the economy and the fact that many institutions have already asked shareholders for money.
Japan's Nikkei stock market index had its greatest one-day fall since 1987:
Fear ruled the day in Asian markets as panic selling sent benchmark indices to multi-year lows on Wednesday.

Markets from Tokyo to Jakarta tumbled sharply, dragged lower by another gloomy session on Wall Street that saw the Dow Jones industrial average notch its biggest five-day points fall ever.

Japan led the dive, with the Nikkei 225 plunging 9.4 percent to its biggest one-day drop since the 1987 stock market crash.
Central banks around the world joined together in a global interest rate cut:
Central banks around the world Wednesday cut interest rates amid mounting losses in financial markets, as the credit crunch continued to seize up lending.

The Federal Reserve lowered its federal funds rate a half a point to 1.50 percent. It also lowered its discount rate as well. The Fed, whose decision was unanimous, last cut rates a quarter point in April.

Central banks in the UK, European Union, Switzerland and elsewhere participated in the move. ...

Australia cut rates a full percentage point Tuesday. Hong Kong authorities cut rates Wednesday.

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