A CONSPIRACY SO VAST:

European Governments Rescue Another Failing Bank (Edward Cody and Mary Jordan, 9/30/08, Washington Post)

European confidence was eroded over the weekend by a raft of emergency bank rescues. By Monday morning, after Asian stock markets had nose-dived, credit markets were seizing up, meaning that the normal flow of trading among banks wasn't taking place. The European Central Bank then announced it was pumping an extra $173 billion into European markets. In Washington, the Federal Reserve said it would make an additional $620 billion available for future lending to nine foreign central banks.

The head of one of those nine, Bank of Japan Governor Masaaki Shirakawa, said Monday that global financial liquidity "has almost dried up."

European banks are strained by the recent collapse of property booms close to home, notably in Britain, Spain, Portugal and Ireland, by exposure to bad U.S. mortgage securities, and by the general drying up of short-term credit. Japan's economy is already suffering from a highly unusual trade deficit, and domestic demand for goods appears to be waning, too, the Tokyo government reported Tuesday. Last month household spending fell 4 percent and factory output dropped 3.5 percent.

The House rejection of the White House's $700 billion rescue plan seemed likely to increase international concern over what might be next.

In Europe, the banking crisis "can hardly spread further -- it is everywhere," said Willem Buiter, a professor at the London School of Economics and former member of the Bank of England's monetary policy committee.

European Central Bank President Jean-Claude Trichet sat down Sunday with several European finance ministers in Brussels to discuss loosening European Union rules on government guarantees for banks in need of quick infusions of capital. Their meeting suggested that European governments feared they would need to intervene again.

French President Nicolas Sarkozy, who said Thursday that French banks appeared able to overcome the threat, summoned the country's top bank executives, his senior financial aides and the governor of the Bank of France for an urgent meeting Tuesday. His finance minister, Christine Lagarde, renewed her promise that "the government will assume its responsibilities" to prevent losses to French savings and investment account holders.

Sarkozy's office said he had conferred Friday with President Bush, pushing his idea for a meeting of heads of state from the major industrial powers by year's end to envision a top-to-bottom overhaul of the world financial system. The summit could be held at Bretton Woods, N.H., where officials met in 1944 to set the basics of today's world financial system, the Paris media reported.

Those evil geniuses at ACORN have co-opted central bankers and heads of state all over the world to help them get their funding from those House GOP dupes.

MORE:
Wild Times in the Credit Markets (Ben Levisohn, 9/30/08, Der Spiegel)

With the financial system bailout plan derailed by the House of Representatives on Sept. 29, the resulting plunge in equities made headlines around the world. But while the stocks gyrate, it's important to keep one thing in mind: The big problem for financial markets is still the credit crunch. So as bad as equities have looked -- and during the big Sept. 29 sell-off, they looked pretty bad -- the true indicators investors should be watching are obscure measures such as credit default swaps, TED spreads, and commercial paper volume (all explained below).

These names may sound wonky and insider-y, but they are nonetheless vital to understanding just how difficult, costly, and fearful the credit markets have become. They're the reason the stock market, in general an indicator of investor sentiment, plunged on Sept. 29 after the bailout failed. Without the plan, the markets recognized that the credit markets, the lifeblood of American business, will get worse before they get better. "The market understands the lack of liquidity that exists and the repercussions it will have on companies big and small," says American Capital CEO Malon Wilkis.

Bush attempts to reassure markets (BBC, 9/30/08)

US shares are expected to rise on opening after President George W Bush renewed calls for Congress to back the $700bn (£380bn) banking rescue plan.

Although Wall Street saw sharp falls on Monday after Congress blocked the deal, investors appear hopeful a fresh plan can be agreed later this week.

Mr Bush warned that if agreement is not reached, the US economy faces "painful and lasting damage".

Global shares have seen volatile trading since Monday's deal failure.

Papers dismayed at US finance vote (BBC, 9/30/08)

"Meltdown" is how many of the papers describe the extraordinary falls in the financial markets after the shock vote.

According to the Times, money markets lurched close to a "catastrophic breakdown" on hearing the news.

For the Daily Telegraph, what could have averted the "potential collapse of the global financial system" has left it "staring into the abyss"

Posted by Orrin Judd at September 30, 2008 8:37 AM