Shares fall amid concerns over $700bn financial rescue plan
Shares in London, Europe and Asia have fallen amid doubts over the $700 billion (£378 billion) US Government’s financial rescue plan.
While the rescue plan has been welcomed, there are fears about how it will come into effect in practice.
In London, the FTSE 100 index lost over 100 points in morning trading to 5,143.05 after losing 75 points yesterday.
Meanwhile, the Cac 40 in Paris fell 1.9% , while Frankfurt’s Dax lost 1%. Hong Kong’s HSI ended nearly 4% lower. Yesterday, shares in the US fell sharply, with the Dow Jones index closing down 3.3%.
Henry Paulson, US Treasury Secretary, believes that the American banking system faces meltdown unless a rescue package is implemented immediately. Congressional and Treasury officials have been in discussions over the weekend to try to get the package signed into law within a matter of days.
Mr Paulson is to argue the case for the package on Capitol Hill, Washington D.C. The plan is to allow the US Treasury to buy toxic mortgage-backed assets.
Meanwhile, commenting on the turmoil in the financial markets, President George W. Bush has warned that failure to act would have broad consequences.
Last week, global shares plummeted after the collapse of Wall Street giant, Lehman Brothers, the rescue of US insurance giant AIG and Bank of America’s takeover of Merrill Lynch. Investors panicked fearing that other financial institutions would suffer the same fate as Lehman.
Meanwhile in the UK, Lloyds TSB is to takeover HBOS in a deal worth £12.2 billion, however, the agreement could result in thousands of job losses.
Finally, the remaining two independent investment banks on Wall Street, Goldman Sachs and Morgan Stanley, yesterday changed status and received regulatory approval to convert themselves into traditional bank holding companies.
The conversion of Goldman Sachs and Morgan Stanley marks the end of the New York investment bank.