US $700bn bailout rejected

| September 30, 2008

Following a day of bailouts and nationalisations, it was announced late last night that the US $700 billion (£380 billion) bailout was rejected after it failed to gain support from Congress who voted against the proposed scheme.

Talks have been taking place over the last few days between the Government and lawmakers and yesterday the plan was rejected by 228 to 205 votes in the House of Representatives.

President George W. Bush is due to make a statement on the logjam over the bailout plan today.

It is anticipated that panic will grip world markets and shares will fall sharply. Yesterday saw the nationalisation of the UK’s largest buy-to-let lender, Bradford & Bingley, while Fortis was bailed out by three Governments. Wachovia, once America’s fourth biggest bank, agreed to a rescue takeover by the world’s largest bank, Citigroup.

Following yesterday’s turmoil, shares fell sharply as the FTSE 100 index closed down 269.7 points to 4818.8, a fall of 5.3% and its eighth worst one-day percentage loss ever.

Shares in Barclays, RBS, Lloyds TSB, HBOS fell 8%, 19%, 12% and 15% respectively.

Meanwhile, across the Atlantic, the Dow Jones industrial average fell by over 300 points to 10830, a fall of nearly 3%.

According to analysts, without a bailout plan, more banks will be at risk of collapse, 14 commercial banks have already gone bust this year.

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