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Recue Plan 2.0: Brown Knows Best?
October 13, 2008 9:49 AM
ABC News’ Betsy Stark reports: Call it Rescue Plan 2.0, the Global Bailout. In Madison Avenue terms, it’s New and Improved and Extra Strength. The worst week in Wall Street history has had a sobering effect on government leaders around the world, who weren't exactly slacking off before the sky fell on global financial markets. But they really mean business now and judging from the positive reaction in financial markets this morning, investors are beginning to believe.
Rescue 2.0 might also be dubbed the British Plan. Last week Prime Minister Gordon Brown announced a strategy some private economists here were urging, reportedly along with Ben Bernanke, to inject capital directly into banks, rather than buy their bad assets, as the Paulson plan directs. The idea is that a direct capital infusion is the fastest way to shore up weak balance sheets and make sure banks have enough cash to get back in the business of lending to cash-starved clients. And the bonus for taxpayers is a preferred equity stake in these banks in exchange for this cash aid.
But in the face of the worst week in Wall Street history, there were fears that might not even be enough
to jump-start that market we can't see but that is still at the heart of this crisis: the credit markets. So there's expected to be another new feature to Rescue 2.0: government guarantees of inter-bank lending. Sounds very technical but the idea is this: Credit is the lifeblood of the global economy and it won't flow if big banks don’t open their spigots to each other, fearful that their counterparties won't be around to pay back the loan. These routine short-term loans are so vital to the global economy that governments are now saying: We'll guarantee you big banks that you'll get paid back… so LEND! This is designed to get those critical LIBOR rates down to more normal levels. By the way, whose bright idea was this? Another shout out to the British, who announced their intention to do this in the United Kingdom late last week.
The bottom line here is that in the face of global financial markets in free fall and a brewing global recession, policymakers have upped the ante considerably. And they have taken major steps toward coordinated intervention even as they tend to their own backyards. They understand that in a global financial system, where huge sums of money can move at the stroke of a key, one country can't have a far better bailout plan than another or investors will flee with their money to the nation with the best guarantees. That would be hugely damaging and destabilizing.
These are bold measures. They are taken mindful of what happened in the 1930s when central bankers and government leaders sat back and let events unfold. No one is saying we're out of the woods, but investors have reason to be hopeful.
October 13, 2008 | Permalink | User Comments (40)
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The whole thing stems from the problems in the mortgage market. Which in turn stems from Democrats passing laws to make it possible for poor uneducated irresponsible people to get home loans they couldn't handle. PERIOD
Posted by: chris | Oct 13, 2008 12:43:26 PM
McCain Bush Palin Cheney time for all of them to retire or even better be arrested for treason!
Posted by: philosopherkingtomas | Oct 13, 2008 2:01:59 PM
Britain is fineing and jailing some bankers and Bush (the weasel) should do the same. Bush sure talks tough to terrorists with torture, but barely a slap on the wrist for his buddy bankers and financiers/lobbyist who perpetrated the sham and cost millions of us our retirment , savings, job etc. As far as I am concerned they are financial terrorist and derserve the same if not worse than those at Gitmo!
Posted by: eyeonyou | Oct 13, 2008 2:52:31 PM
Sorry but I think your comment in the article isn't quite: it was not Britain but the Netherlands who first spend some 36 billion euro to get stakes and stocks in their bank. The bailout money for such a small county is 200 billion euro.
Posted by: usmaus | Oct 13, 2008 3:00:22 PM
GOOD THATS GREAT NEWS...WE FOUGHT THE WAR AND THEY PAY THE BILL GREAT...
Posted by: Manchester UNTIED | Oct 13, 2008 3:49:50 PM
Paulson have lost all his credibility when he scared Bush and Congress to immediate passage of his $700B Paulson Bailout Scam that helps none and nobody but his friends and former cohorts in Wall Street.
Paulson had now also lost the confidence of the other 6 finance ministers of the G7 Group and of the European countries, including its Prime Ministers.
With Paulson worldwide downfall, US no longer leads the world financial communities but become a follower and copycat to the financial ministers of the said G7 and of European countries.
With the big stock market surges today, Paulson and Obama would claim credit for being right about solving or easing our financial crisis.
Forget about McCain, he does not have the audacities of Obama to know and claim superior experienced expertises on anything and everything to be our country’s President.
Obama is simply a much better salesman than Paulson and McCain.
Posted by: Zee P Bee | Oct 13, 2008 4:37:56 PM
we should be happy that gov paid up. now let's get to work and elect mccain. obama can lead when he shows more passion and in 4 years or 8. he is young enought to wait and we need experience to sustain the tought times we have gone thru. country still too devided for him to lead but i bet he will win hands down when all dust settles. hurray for usa and britain. i'll be investing in pharmaceuticals in years to come as we now face an againg society. almost 80 million of the 300 million americans will retiring in next several years and it's our turn to take care of them. greeeeeeeeeeaaaaaat news.
Posted by: zorra | Oct 13, 2008 5:31:00 PM
"Reconstruction Finance Corporation". Is this the GOP "October Surprise"?
Posted by: Jordan | Oct 13, 2008 5:40:19 PM
Sounds like Russo was right.
Posted by: dragon | Oct 14, 2008 8:30:15 AM
Actually the fault lies in Executive pay based on short term goals, which caused the need for different financial instruments that allowed the Corporate Executives to push fake earnings, and increase their pay. In short, GREED!
Posted by: Rob | Oct 23, 2008 6:00:31 PM
You say you want a revolution. I'am at that point. Between me and you what we need is to start throwing these Wall St. Terrorists and criminals in jail. Yes I said TERRORISTS and CRIMINALS. What they should be charged with is TREASON!!!! How dare they (Criminals like Phil Gramm) call me a whiner when they take my money that I invested for my retirement and steal the money and leave me with nothing. I did not screw up I played by the rules, I went out and worked mu 8 plus overtime every day. I did not go out and figure out ways to screw the United States populace on my 3 martini lunch brakes. They say that the money was never there in the first place. Well explain where the MONEY in my 401k went to. I deposited it. Huh Now as these a###oles get their bonuses and ride off to their Mansions and gated communities with their truckloads of cash. As I eat my catfood and have my house foreclosed on. I hope that HELL has a special place for you. If I was King for one week I'd make sure that all you TERRORISTS would be swing at the gallows by friday. It does not matter if you steal with a gun or with a keystroke it is stealing.
Posted by: jim mcatee | Oct 23, 2008 11:55:36 PM
IT IS A SHAME THAT AMERICA IS NO MORE SUPER-POWER UNDER THE REPUBLICANS ! 8 YEARS OF ECONOMIC DOOM. AND WITH J.McCAIN DECLARING HE NEEDS EDUCATION ON THE ECONOMY AT THIS TIME, IT IS VERY SCARY!! YOU CAN´T BE MILITARILY STRONG IF THE ECONOMY CONTINUE TO GO DOWN THE DRAIN !!
Posted by: JUNIOR | Oct 27, 2008 7:40:27 AM
IT IS A SHAME THAT AMERICA IS NO MORE SUPER-POWER UNDER THE REPUBLICANS ! 8 YEARS OF ECONOMIC DOOM. AND WITH J.McCAIN DECLARING HE NEEDS EDUCATION ON THE ECONOMY AT THIS TIME, IT IS VERY SCARY!! YOU CAN´T BE MILITARILY STRONG IF THE ECONOMY CONTINUE TO GO DOWN THE DRAIN !!
Posted by: JUNIOR | Oct 27, 2008 7:42:12 AM
If anyone reading this cannot realize they are wrong about what they think about this situation, there is no hope of you ever becoming correct.
Similar, I know that my final analysis will most likely be wrong, but I blame the lack of real knowledge being described to the population, not the lack of intelligence. Most people 75-80% are geniuses at least they are in elementary school (just finished an experiment showing this factually).
Now to the economy, Derivatives in America, do NOT get an automatic stay during bankruptcy. THEREFORE, technically, they beat ALL creditors, EVEN Federal government. It has been because of OFF-SHEET tranactions, the same 'type' as ENRON that has screwed the banks.
ALSO, DO NOT BLAME THE DEMS, IT was the BANKS who LOBBIED and ADVERTISES for over TWO WHOLE YEARS to allow for Equity Lines of Credit. It has been the use of houses as ATMs that has 'screwed the pooch.'
As an bubble, housing burst, but the causing of systemic collaspe has been because unlike Enron and Worldcom, banks had to keep these assets on their books. Also PRIVATE EQUITY funds have been robbing the public firms balance sheets for years after Enron.
When you blame one reason, like Dems, Bush, or others, like only derivatives, or only housing, you will most certainly be wrong. Even though in this case, mostly it was 'free-market radicals' termed 'liberal economics' in Britain, but called 'conservative economics' in America, that caused most if not all these problems.
Posted by: FactsOverFiction | Oct 28, 2008 3:10:44 PM
HILLARY CLINTON SAID:
SENATOR JOHN MCCAIN HAS A LFETIME OF EXPERIENCE THAT HE WILL
BRING TO WHITE HOUSE AND SENATOR OBAMA HAS A SPEECH HE GAVE IN 2002.
NO WAY. NO HOW. NOBAMA.
Posted by: HILLARY ENDORSMENT | Nov 2, 2008 2:03:37 PM
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