Monday, October 13, 2008

Plus for Brown and Sarkozy, So Far

In the handling of the fianncial crisis so far, Gordon Brown and Nicolas Sarkozy appear to be winners. Brown's plan to assume an equity stake in banks is being adopted all over, even in the initially reluctant United States. And Sarkozy's insistence on a joint plan has carried the day in Euroland over Merkel's objections. Sarko is approved by 53 percent at home for his handling of the crisis--a remarkable 20 point premium over his normal approval rating. Compare with Bush, whose bad marks on crisis management have pushed his already low ratings to their nadir.


Anonymous said...

Art, do you happen to have seen any comparison between the words of the main players and their actions? I can't find anything I'd refer to as 'handy' showing how things are playing out in terms of how much actual money has been doled out to the banks in the US, Germany, France and the UK. Just thought it'd be interesting...

Unknown said...

The Swedish government said on Monday it would unveil steps to safeguard their financial sector in the next few days, but did not plan to inject capital into the Nordic country’s banks. Norway announced at the weekend it would offer its commercial banks up to $55.4bn in government bonds in exchange for mortgage debt and Portugal said it would make as much as €20bn available in guarantees for its banks’ financing.

In the UK, Gordon Brown, the prime minister, announced the effective nationalisation of three high street banks. Mr Brown defended his government’s “unprecedented but essential” £37bn injection that could leave it owning a 60 per cent stake in Royal Bank of Scotland, one of the world’s biggest banks, and 43 per cent of the combined Lloyds TSB and HBOS, which is set to be the country’s largest mortgage lender.

The announcement also saw the resignation of Sir Fred Goodwin, RBS’ chief executive, and the announced departures of its chairman, Sir Tom McKillop, as well as the chairman and chief executives of HBOS, Lord Stevenson and Andy Hornby.

All three will have any dividends cancelled. Meanwhile, Barclays, which said it would raise £6.6bn from investors, said it too would forgo paying its final dividend.

The German government endorsed measures closely modelled on the British rescue plan unveiled last week, will initially empower the finance ministry provide as much as €500bn in loan guarantees and capital to bolster the banking system.

Europe’s central banks promised unlimited dollar funding in co-ordinated action with the US Federal Reserve. This dramatic further expansion of Fed liquidity operations is intended to ease the intense demand for dollars in Europe. The European Central Bank, Bank of England and Swiss National Bank said they were ready to inject as much as needed into the markets for dollar funding covering periods of seven days, a month and 84 days.

Paris will guarantee up to €320bn in inter-bank loans and provide €40bn in new capital for banks. Christine Lagarde, French finance minister, said French banks should use the funds to raise their tier one capital ratios to 9 per cent, so that they are on “a level playing field” with British banks.

The Netherlands, Spain, Italy, Austria, Portugal and Norway joined the effort, committing a total of €481bn in guarantees and capital, while the British government said it would provide £37bn (€47bn) in new capital to three of the country’s largest banks – as part of its already announced £400bn bail-out plan.

From Financial Times.