Stand by for Black Monday: Britain braced for meltdown as Bush admits 'we have a big problem' after bail-out talks fail

 

By Daily Mail Reporter Last updated at 5:42 PM on 26th September 2008

 

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• Bush has yet to push through his $700bn bail-out plan
  
  
• McCain blamed for scuppering the crucial deal
  
• Shares drop around the world with FTSE down 1.8%
  
• Bank of England makes $80bn available to banks
  
• Biggest U.S. bank failure as Washington Mutual closes
  

The U.S. President today admitted he has failed to land a bank bail-out deal, leaving the world on the brink of a global financial catastrophe.

President Bush was forced to admit he had not yet been able to persuade senior Republicans to back his $700 billion rescue plan.

Experts predict the London Stock Exchange could fall by up to 1,000 points when it opens next week if the deal is not signed.

It would be a 'Black Monday' meltdown similar to the financial crash of 1987. Other world markets would also be sure to fall dramatically.

In a terse statement from in front of the White House, the President conceded this afternoon: 'We've got a big problem and we've got to move quickly.'

'Big problem': President Bush at the White House today where he insisted the U.S. would 'rise to the occasion' and agree a rescue deal for the economy

He admitted there were still disagreements about the plan which saw a summit descend into a 'slanging match' last night but insisted the U.S. would deliver.

'The legislative process is sometimes not very pretty but we are going to get a passage passed. We will rise to the occasion - Republicans and Democrats will come together to pass a substantial rescue plan,' he said.

However, his candid statement that the rescue deal masterminded by U.S. Treasury Secretary Hank Paulson had still not been approved - interpreted as a fresh plea to Congress to sign up to it - leaves the global economy on the brink of disaster.

 

American politicians now effectively have three days of frantic negotiations to save the world's financial system from a seizure that could cast it into a deep recession.

Bryan Johnston, investment director at brokers Bell Lawrie, said: 'If Paulson's plan fails, we will see a collapse in the markets and taxpayers will effectively pick up the tab. I cannot believe the posturing among US politicians but I believe after taking it to the wire the plan will be voted through because it cannot really afford to fail.

'However, nothing is certain anymore and if it did fail, we could see 1000 point falls on the FTSE on Monday and we would be out of a job while the banking system would freeze up completely.'

He added: 'It is incredible to believe we are seeing worried clients ringing up asking if RBS will go bust, which would have been inconceivable just a few weeks ago.'

Other senior market figures said the fall on the FTSE-100 would be at least 600 points while the Dow in New York could fall by 1000 points.

People power: People rally in front of the New York Stock Exchange in the financial district against the proposed government buyout of financial firms

 

Markets around the world had already plunged back into despair today after the talks in Washington broke down, bringing to an end a second week of drama and uncertainty.

The faltering negotiations, blamed on Republican candidate John McCain, saw the London Stock Exchange fall 1.8 per cent, or around 100 points today, and the Dow Jones was down a similar figure after opening.

 

 

More...

 

 

• Bank of England offers £43bn to beleaguered banks after U.S. stalemate rocks the markets
  
• Biggest bank failure in history of the U.S. as sub-prime mortgages fiasco claims another victim
  
• HSBC slashes 500 jobs in Britain, blaming 'credit crunch'
  
• House price growth at lowest level ever after a record 4.6% fall over the past year
  
• Homeowners face paying an extra £450 a year as lenders rush to raise mortgage rates
  
• Cold comfort: Struggling pensioners forced to cut back on food and fuel
  
• Will he or won't he? Obama vows to attend televised debate even if McCain doesn't show
  
• When Sarah B met Sarah P: Mrs Brown has dinner with would-be vice president Mrs Palin
  
• Ireland becomes first eurozone country to slide into recession... and more will follow, say experts
  
• Commentary: The bankers look safe, but ordinary Americans are very, very angry
  
• P.S. Should we be worried that the U.S. Treasury Secretary is a dead ringer for rogue trader Nick Leeson?
  
• Royal fashion house Hardy Amies 'may go into administration'
  

 

In the UK, banks were once again among the biggest losers. Shares in the beleaguered Bradford & Bingley fell 4p to an all-time low of 17.25p after a 25 per cent drop yesterday.

Meanwhile, banking giant HSBC added to the gloom by announcing it was shedding 500 British jobs as part of worldwide cost-cutting measures.

 

Investors were also shaken by the biggest bank failure in U.S. history after Washington Mutual, its largest savings and loan firm, was closed by the Treasury and its banking assets sold to JP Morgan for $1.9 billion.

And the price of gold - a traditional safe haven - jumped four per cent today to $911.15 an ounce.

 

 

 

Enlarge Talks: Leaders, including John McCain, far left, and Barack Obama, far right, meet to solve the turmoil at a White House summit hosted by George Bush, centre

Mr Bush emerged from the White House to give his brief statement just hours after House of Representatives speaker, Nancy Pelosi, stressed a deal 'has to happen'.

In a television interview, she said she was hopeful an agreement would be struck within the next 24 hours so that Congress could act on legislation over the weekend.

Gordon Brown was due to land in Washington this afternoon to discuss the ongoing economic problems with the President.

Ahead of the meeting, he told the UN General Assembly that the 'age of irresponsibility' in banking had to end for stability to be restored as he called for international action to rebuild the world's financial systems.

He also repeated his support for the Bush administration's bail-out proposal, saying: 'In the short-term, each country is taking action to deal with the fallout of the credit crunch, and America deserves support from the rest of the world as it seeks to agree in detail what all parties agree in principle.'

Central banks stepped up their efforts to ease the crisis by pumping yet more money into the markets. The Bank of England offered $80 billion to British banks - $30 billion now, another $10 billion overnight and the rest in the form of three-month loans.

But it is negotiations in the U.S. that could make or break attempts to stave off further disaster.

 

Mr McCain was being blamed after his party refused to sign up at last night's summit despite dire warnings from President Bush the whole economy was at risk and desperate pleas from U.S Treasury Secretary Hank Paulson.

House Republican leader John A. Boehner of Ohio had astonished the critical meeting by announcing his caucus would not support the plan and asking for a smaller role for the Government.

As his proposed rescue collapsed around his ears, Mr Bush gloomily declared: 'If money isn't loosened up, this sucker could go down,' according to an insider at the meeting.

Mr Paulson also reportedly knelt before Ms Pelosi to beg - half-jokingly - for her support as they left, to which she responded wryly: 'I didn't know you were Catholic' before adding: 'It's not me blowing this up, it's the Republicans.'

Stony faced: Mr McCain exits the White House after failing to reach an agreement

Senior democrats suspect Mr McCain is orchestrating the opposition so that he can step in with a last-minute solution of his own. They also fear their party will be blamed for the unpopular deal if few Republicans vote for it.

At least some Republicans will have to agree before Ms Pelosi goes ahead and puts it to the vote in Congress. Democratic Representative Barney Frank said late last night: 'For House Republicans to take a walk is just appalling.'

He reportedly likened Mr McCain's intervention to Richard Nixon ruining the Vietnam peace talks in 1968 and there are now fears the deal in its current form may never get off the ground.

Senator Harry Reid laid into Mr McCain again today as the talks were about to re-start, declaring it was not the time for presidential politics and that their intervention had not only been unhelpful but 'harmful'.

Legislators from both parties appeared to have reached an agreement earlier yesterday before senior members, including Mr McCain, Democratic presidential candidate Barack Obama and President Bush, met at the White House.

However, amid concerns about the expense - it will cost each taxpayer more than $5,000 - and the enormous role the U.S. government would have to play, McCain's campaign office said talks had 'devolved into a contentious shouting match'.

A statement said: 'The plan that has been put forth by the administration does not enjoy the confidence of the American people as it will not protect the taxpayers and will sacrifice Main Street in favour of Wall Street.'

 

Confident: Democratic presidential candidate Barack Obama said he was optimistic an agreement would be reached but said politics should be set aside

 

 

His aides insisted he 'did not attack any proposal or endorse any plan' but his support for an alternative approach was immediately blamed for derailing the negotiations and blindsiding lawmakers.

The Republicans have proposed an alternative plan which would not involve the American taxpayer taking on huge debts. Banks would instead agree to hold on to their 'toxic' mortgage assets in return for the government providing insurance.

However, Mr Paulson at the Treasury has already rejected the idea as unworkable.

'Secretary Paulson has told us several times that the number one plank of the House Republican plan, an insurance scheme, will not work,' Mr Frank said.

At a press conference earlier yesterday on Capitol Hill, Senate banking committee Chairman Chris Dodd and his fellow negotiators said they had reached a bipartisan consensus on the plan but he claimed Mr McCain had scuppered it.

'What has happened here is that we have spent seven straight days to find a rescue plan for the economy. What this looked like was a rescue plan for John McCain. To be distracted for two to three hours by political theatre doesn't help,' he said.

 

 

Down on one knee: U.S. Treasury Secretary Hank Paulson reportedly knelt before House Peaker Nancy Pelosi and begged her to support his deal

Democrats said the Republicans were on board with the deal until Mr McCain intervened. One aide described the tense White House meeting as a 'full-throated discussion'.

Emerging afterwards, Mr Obama claimed there had been a general agreement when he and Mr McCain had flown into Washington but that 'something happened in the intervening hours'.

 

 

In a subtle dig at his opponent, he said: 'The concern I have is that when you start injecting presidential politics into delicate negotiations you can cause more problems rather than less.'

But he insisted he still believed a deal could be struck. 'Eventually, we are going to get a deal, but there is still some more work that needs to be done. I think that both myself and Senator McCain have to be very careful in terms of how we inject ourselves into the process.'

The bad feeling is in sharp contrast to the mood of rising optimism yesterday when Democrats said they were prepared to back the plan.

Earlier President Bush had broadcast to the American people warning that failure to agree the deal risked plunging the world economy into 'a long and painful recession'.

Democrats have called on the President to put more pressure on his own party today to get the deal through.

The fall-out has also left the first Presidential debate of the 2008 campaign, planned for later today, in jeopardy.

Congress was due to close down tonight because of the upcoming elections but is likely to be extended to allow for an agreement to be made.

City bonuses 'to shrink by half' as financial crisis continues

 

By Simon English Top City bankers were nervously comparing notes today amid fears that year-end bonuses are set to shrink by at least half.

Morgan Stanley and Goldman Sachs have put their usual October meetings to decide bonus payments on ice while they cope with the worldwide financial crisis.

Most payments will be almost entirely in shares and compensation experts say that the City's £8.5billion bonus pot last year is likely to be halved at least.

Although news of the falling bonus payments is unlikely to provoke much sympathy, many City staff rely on year-end bonuses to fund day-to-day expenses.

 

Sinking feeling: An art installation of a capsizing yacht on the Thames in London near to the office of bankrupted Lehman Brothers

A slump in bonuses is likely to hit London house prices. Leading figures have protested about the City's bonus culture and Gordon Brown said some bonuses were simply 'unacceptable'.

For a lucky few, however, there is no sign of the gravy train coming to a standstill.

The elite investment bankers at Lehman Brothers - whose collapse was perhaps the most shocking failure of the credit crunch - have been offered large cash bonuses just for staying with the company until autumn 2009.

Nomura, the Japanese bank which has just bought Lehman's European and Asian arms comprising about 2,500 staff, wants to lock in those it regards as vital.

One banker who had been offered the payment told the Financial Times: 'I think it's attractive.'

Is Black Monday racist? They should call it Technicolor Monday.

*prepares for the worst*

Is Black Monday racist? They should call it Technicolor Monday.

 

:rolleyes:

Print more money, dangit! Faster, faster!

Print more money, dangit! Faster, faster!

 

*facepalm*

Today was a bad day :(

I think China will bail us out and we won't see a very bad recession. I think our government with help from others, will keep away a bigger problem for a little bit longer.

I think China will bail us out and we won't see a very bad recession. I think our government with help from others, will keep away a bigger problem for a little bit longer.

 

Well you can't keep kicking a can down the road forever.

 

I'm fairly certain the next few years will see a huge shift in money away from the US and into foreign exchanges as a result of economic mismanagement by an Obama administration. But our markets have probably already priced this in. We won't see the other side of DOW 10,000 for another couple years probably. Taxes and higher inflation will kill this economy for a few more years at least.

Well you can't keep kicking a can down the road forever.

 

I'm fairly certain the next few years will see a huge shift in money away from the US and into foreign exchanges as a result of economic mismanagement by an Obama administration. But our markets have probably already priced this in. We won't see the other side of DOW 10,000 for another couple years probably. Taxes and higher inflation will kill this economy for a few more years at least.

 

Yes yes, of course. But, I think we just kicked it one more time and who knows how far it'll go. We may have just delayed the inevitable for a little longer, opposed to before when I was thinking it would be now that the crash was coming. But I think our government and China have postponed it for a little while.

 

But maybe that'll give me just enough time to fix my mistakes and get ready for the future?