UK shares set to slump as crisis deepens
The US congress has rejected a $700bn bail out plan designed to restore confidence to the paralysed banking system.
The rescue plan, designed by US Treasury Secretary Henry Paulson, would have been used to buy toxic assets on the books of the world’s biggest banks. The hope was that once those assets were removed the banks would begin lending to each other again.
However the deal was rejected and Wall street has suffered one its worst days in history. In the last 48 hours five banks across the West, including the Bradford & Bingley have had to be rescued to avoid insolvency.
Paulson said: “This is much too important to simply let fail. Steny Hoyer, the House Majority Leader added: “A meltdown would begin on a few square miles of Manhattan but before it was over no city or town in America would be untouched.
The UK stock exchange is preparing for the news to impact on shares this morning. The UK insurance sector is still examining the impact of the financial crisis on the world’s leading insurer, AIG and Fortis, which has itself been bailed out by the Belgium government. A number of insurers are also in talks with the government over the terms of their affinity cover agreements with the Bradford & Bingley.
