Even given the events of the past 12 months, today has been pretty monumental in the world of finance, and not in a positive way. Here’s how things have panned out:
First of all here in the UK the Government announced the details of the bail-out of Bradford & Bingley bank, which didn’t go down too well on the London Stock Exchange, with the FTSE 100 falling over 5%. Santander will buy up and guarantee the savings arm of the business, whilst the Government will nationalise the stinky mortgage debt that is left over.
Next we learned that insurer Fortis has been partly nationalised by three European governments. Fortis has been struggling since it brought an overpriced chunk of ABN AMRO last year.
Later on in the day, the fourth largest bank in the US, Wachovia, was brought by its rival Citigroup, a bank which has its own problems, yet obviously feels it can still fork out to save another failing bank.
Finally, the real bombshell hit this evening – Congress rejects the American bail-out plan, something that hadn’t been expected at all (it seems that even Gordon Brown was caught by surprise by the decision). The Dow Jones share index reacted by plummeting by nearly 8%, and lost more points in a day than it ever has before. Scary.
All in all, it makes for extremely uncertain times. I’m a little fearful for how the UK markets will react in the morning, as they were closed when the result of the Congress vote was announced.
One hopes that today marks the low point in the financial turmoil, from which things will slowly start to get better, but I won’t hold my breath. It’s unclear how things are now going to progress in the States, and this will have repercussions for the rest of us.
I suspect there is more turmoil to come, but whether it can match the magnitude of today’s events is another matter.
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