World central banks move to ease tension

Friday 26 September 2008 22.54
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White House - Talks end without agreement
White House - Talks end without agreement
Washington Mutual - Takeover by JP Morgan
Washington Mutual - Takeover by JP Morgan
Wall Street - Rescue package stalled
Wall Street - Rescue package stalled

World central banks have pumped more dollars into the world's financial system to try to ease tensions on the money markets.

The US Federal Reserve, the Bank of England, the Swiss National Bank and the European Central Bank will offer dollars to the markets on one-week arrangements.

The ECB said the moves were aimed at easing pressure before the end of this month.

Banks usually look for extra funds at the end of each quarter of the year to help them balance their books. But the current market turmoil has made them more reluctant to lend to each other, pushing up interest rates.

Meanwhile, European stock markets closed down almost 2% as they awaited more talks on the US government's plan to bail out the country's financial institutions.

US stocks were mainly up with the Dow Jones up 138.83 points at the closing bell. The Nasdaq lost a modest 3.23 points and the Standard & Poor's 500 rose 6.23 points to a close of 1,215.41.

US President George W Bush has urged lawmakers to set aside differences and swiftly pass a rescue plan to pull the financial sector back from the brink of collapse.

Mr Bush said: 'We need a rescue plan. It's hard work. Our proposal is a big proposal. And the reason it's big and substantial is because we've got a big problem.'

Talks on the multi-billion dollar rescue package for Wall Street have resumed after they adjourned in acrimony last night.

Democratic and Republican Congressmen met President Bush at the White House but failed to agree on the $700bn proposal to buy bad debts from US banks.

Democrats accused Republican presidential candidate John McCain of scuppering the deal in order to keep the support of his party's conservative base.

The McCain campaign claims Democrats are making him a scapegoat for a failed deal.

Meanwhile, Mr McCain has confirmed that he will participate in tonight's debate against Mr Obama in Mississippi. You can watch the debate live here on rte.ie from 2am. Mr McCain had called for the debate to be delayed until the economic situation had improved.

Shortly before the talks, senior US lawmakers announced the outlines of a deal to rescue Wall Street and shore up the fragile economy.

Democrats were calling for limits on pay deals for executives whose companies get rescued under the government deal.

They also said that any deal must include strict oversight by federal regulators.

British Prime Minister Gordon Brown said the world needs to get behind the bailout plan and he also called for regulators to work across borders to prevent future crises.

Mr Brown said: 'In the short term, each country is taking action to deal with the fallout of the credit crunch. And America deserves support from the rest of the world as it seeks to agree in detail what all parties have agreed in principle.'

Brown was in New York for a UN summit. However, in a departure from his original schedule he flew to Washington for an emergency meeting with Mr Bush on the global economy and other strategic issues.

JP Morgan takeover

One of the biggest banks in the US, JP Morgan, has taken over the Washington Mutual bank.

In the deal announced last night, banking giant JPMorgan Chase acquired the deposits, assets and some liabilities of the bank for $1.9bn.

Washington Mutual, incorporated in 1889, had been seen as heavily exposed to the mortgage crisis sweeping the country, and its shares had dropped some 85% this year.

Observers have speculated for months that it would be the next victim of the economic firestorm which has engulfed financial institutions across the country, sparking global turmoil.

Earlier this year, JP Morgan took over Bear Stearns, which had been one of the most high-profile victims of the US sub-prime property crisis.