The accelerating global financial crisis took another turn for the worst yesterday when the US House of Representatives rejected President Bush's $700billion bail-out plan, sending stock markets in Wall Street and London plummeting.
In New York yesterday, the Dow Jones suffered its worst day in history, closing 777 points down after the Bush administration's rescue plan for the banks failed to accrue enough votes to be passed.
Banks around the world have been given emergency liquidity injections, but this has failed to stem further deterioration of the money markets. In the UK, the FTSE 100 and the FTSE EuroFirst 300 fell more than five per cent, recording their biggest fall in one day since January, and heading towards their worst month since the recession of the 1980s.
It is thought that the Republicans, Bush's own party which voted two-to-one against the plans going through, blocked the plan because of the forthcoming US presidential election in November, and how the proposal could cause them to lose seats when Americans voice their objections to the Government using taxpayers' money to bail out the banks. Democrats voted three to two in favour of the rescue plan.
The President, US Treasury and the Federal Reserve had all insisted that the bill was essential to the stability and viability of the American financial system, with the potential to affect the financial systems of countries around the world.
The bad news comes after buy to let mortgage
specialist Bradford & Bingley was taken into public ownership this week, adding to the tax payer's burden, already heavy with Northern Rock which was nationalised earlier this year.
Far from stemming the financial crisis by bailing out Bradford & Bingley, there are fresh fears that more banks will fall foul of the credit crisis, and that the nationalisation of B&B will lead to more banks being taken into national ownership, having a domino affect on the banking sector.
Meanwhile, the Bank of England has revealed that mortgage
lending was down a drastic 95 per cent in August – a record low. Net lending was just £143million compared to almost £3billion in July.
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