Over the weekend while we were transfixed with negotiations over our bailout, Europe made it rain on its banking industry. Thank goodness the natural order is being restored. Euros=Socialists, Americans=Capitalists.
BusinessWeek: In a stunning series of moves engineered over the weekend and announced Sept. 29, six European governments are collectively committing nearly $150 billion to rescue four troubled financial institutions. Coming on the back of the U.S.’s $700 billion toxic mortgage bailout plan, which was thrashed out over the weekend but defeated in a surprise vote Sept. 29, the move likely foretells a more proactive approach among European politicians and regulators to combating threats to the EU economy.
With their high-profile moves to save Britain’s Bradford & Bingley (BB.L), Belgium’s Fortis (FOR.BR), Germany’s Hypo Real Estate Group (HRXG.DE), and Iceland’s Glitnir Bank government officials are changing the rules of the game in Europe. Until now their primary policy response has been to inject billions into the Continent’s credit markets via central banks—but rarely to intervene on behalf of specific troubled institutions. Now policymakers in the EU and its member states are signaling a more aggressive stance that mirrors the speed of U.S. actions.
Today, another European bank got financing:
Bloomberg: Belgium and France threw Dexia SA a 6.4 billion-euro ($9.2 billion) lifeline and ousted the chairman and chief executive officer as the widening financial crisis forced governments to prop up institutions across Europe.
Dexia, the world’s biggest lender to local governments, rose 6.1 per cent in Brussels trading after Belgium’s federal and regional governments, France and the bank’s largest shareholders agreed to fund a rescue. CEO Axel Miller and Chairman Pierre Richard will leave once replacements are found, Dexia said today.
Icelandic bank Glitnir is receiving $859 million in exchange for a 75% stake in the company. Paul Krugman notes that Iceland has 1/1000 of the population of the U.S. So Iceland’s per capita bailout is equivalent to the U.S. giving away $859 billion.
Bloomberg: Iceland’s banks, which rely on money markets for funding, have been among the hardest-hit in Europe as investors shun all but the safest assets. The country’s government is investing 600 million euros ($859 million) in Glitnir in return for a 75 per cent stake.
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