Tuesday, October 14, 2008

Bush announces more rescue plans

President Bush has made an announcement outlining new proposals in tackling the financial crisis. He said he would use some of $750 billion bail out plan to inject into banks. He said that there would be temporary loans to banks to allow a better flow of cash between banks. “When money flows more easily between banks people will find it easier to obtain loans” President Bush said. Taking much credit for plans implemented across Europe, he said that his meeting with G7 leaders had resulted in a coordinated plan to tackle the crisis. “Yesterday leaders in Europe went forward with this plan” he said, and described them as “wise and timely actions”. His plans which hold strong similarities to those implemented in Europe would, “Strengthen banks across our country”, he insisted. But he recognised that some were still concerned. “I know Americans are deeply distressed”, he said, “I recognise the action taken can seem distant from those concerns. But they will help our economy recover”. He added that his plan, formulated with Henry Paulson was “Broad, flexible and aimed at the root cause of this problem” [BBC].

As far as the markets were concerned there was a return to some confidence. The Hong Kong Hang Seng gained 3% but Japan’s Nikkei index saw the biggest rise gaining 14%, the biggest one day rise since October 1990. The Dow Jones also made record gains with a rise of 936 points, an 11% jump [BBC]. The massive rise did not recoup losses seen in the last two weeks. And it repeats a similar picture following 9/11. On September 17th the Dow fell 14% on its first day of trading following the terrorist attack. It regained some losses the following week, but only by around half of that lost. It is the history of such ups and downs that is resulting in continued uncertainty. For many the roller coaster ride is not over yet.

As President Bush acknowledges, many ordinary citizens are still concerned, not only about their savings, but also about their mortgages, repayments and jobs. And that concern doesn’t just exist in the US. Across Europe there has been outspoken anger and criticism from many members of the public. One disgruntled British citizen aired his grievances to a television crew. “So taxpayers’ money has been loaned to interest free to banks so that they can lend me, a taxpayer, money and charge interest” he said, “that’s not right is it?” There is also concern that while some banks have effectively been nationalised, even if only in part, there will exist an imbalance in the banking sector. While Lloyds TSB, HBOS, RBS, Bradford & Bingley and Northern Rock are essentially being part run by the government, others such as Barclays and HSBC are having to compete in an uneven market. On the High Street, many retailers are continuing to see falling sales. Inflation has hit 5.2% in the UK adding to the financial uncertainty for millions [BBC].

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