Response to savings and loans crisis revisited

mortgage

19 September 2008
| By Internal |
image
image
expand image

A New York Senator has flagged the possibility of an agency to take equity stakes in ailing US financial companies.

If approved, the move would be similar (although on a much larger scale) to the Resolution Trust Corp created in the late 1980s in response to the savings and loan industry crisis.

The discussions of a co-ordinated response come after ad hoc responses to the challenges faced by Bear Stearns, Fannie Mae, Freddie Mac and AIG — with Lehman Brothers being left out in the cold.

They also follow a move from the US Federal Reserve and a number of Central Banks to restore liquidity and confidence to the US and global financial system.

Yesterday the Bank of Canada, the Bank of England, the European Central Bank (ECB), the Federal Reserve, the Bank of Japan, and the Swiss National Bank announced a co-ordinated response to the “continued elevated pressures in US dollar short-term funding markets”.

The US Federal Open Market Committee authorised US$180 billion of swap lines to provide funding for both term and overnight liquidity operations by the other central banks.

The increased swap facilities will support the provision of US dollar liquidity of up to US$110 billion by the European Central Bank (an increase of US$55 billion) and up to US$27 billion by the Swiss National Bank (an increase of $15 billion).

New swap facilities have also been authorised with the Bank of Japan, the Bank of England, and the Bank of Canada, in the order of US$60 billion, US$40 billion and US$10 billion respectively.

All the reciprocal currency arrangements have been authorised until January 30 next year.

The latest development in the ongoing liquidity crisis was the acquisition of HBOS by Lloyds TSB for £12.2 billion, creating Britain’s largest mortgage bank. On the news, Lloyds’ shares fell 15.1 per cent, while HBOS shares gained 17.3 per cent.

There is speculation that the sale of Lloyds’ assets may be in the order of £9 billion, with the possibility that HBOS’ Australian operations could be included.

But HBOS Australia and BankWest said customers of the local group would benefit from the acquisition, with Australian banking customers becoming part of one of the world’s biggest banks.

Online Banking

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

GG

So shareholders lose a dividend plus have seen the erosion of value. Qantas decides to clawback remuneration from Alan ...

2 months 3 weeks ago
Denise Baker

This is why I left my last position. There was no interest in giving the client quality time, it was all about bumping ...

2 months 3 weeks ago
gonski

So the Hayne Royal Commission has left us with this. What a sad day for the financial planning industry. Clearly most ...

2 months 3 weeks ago

Insignia Financial has made four appointments, including three who have joined from TAL, to lead strategy and innovation in its retirement solutions for the MLC brand....

1 week 3 days ago

The Reserve Bank of Australia's latest interest rate announcement has left punters disheartened on Melbourne Cup Day....

1 week 2 days ago

The Federal Court has given a verdict on ASIC’s case against Dixon Advisory director Paul Ryan which had alleged he breached his director duties....

1 week 1 day ago