While the U.S. faces a market meltdown as Congress attempted to pass a $700 billion bailout plan — and failed — Europe is engaged in its own bank rescue bailouts.
The governments of Belgium, Netherlands and Luxembourg rescued financial firm Fortis over the weekend with $16 billion to prevent a dominolike spread of failure after no serious commercial bidder could be found.
And Britain nationalized troubled mortgage lender Bradford & Bingley. With that move, every single one of the country's "building societies," or smaller regional banks, has now been taken over either by the government or another big traditional bank.
The only cries louder than those of the shareholders who have lost everything are the sounds of the analysts shouting: "I told you so."
British Prime Minister Gordon Brown sought to soothe troubles nerves by reiterating that his government will stand as the bank of last resort.
"The first economic duty of government is the stability of the system, and I have said, 'We will do whatever it takes to ensure the stability of the British financial system,' " Brown said.
The History Of Building Societies
At one time in Britain — as in so many places — the building societies helped people buy a house.
Like the old savings and loans in the U.S., they existed on a quaint old-fashioned idea, whereby for every pound of sterling of hard-earned savings deposited with them, they would lend out one pound sterling, and make a profit on charging more to their borrowers than they offered to their savers.
Then, in the go-go days of the '80s and '90s, fast-money men came along and said the quaint old-fashioned building societies should become banks, and then they'll be able to raise money on international capital markets. And so they did.
"It was clear they would expand their balance sheet fast, which took place," said Will Hutton, a columnist for The Guardian. "It was clear they'd be so hungry for short-term profit that they'd make mistakes. It was clear they'd get taken over, and we'd lose our regional financial system. And it's happened."
Contagion Spread To Europe
All of this came just as the contagion spread to continental Europe with the news that banking and insurance giant Fortis will also be partially nationalized.
Fortis' Chief Executive Filip Dierckx said rumors and speculation were partly to blame, but he did admit the bank had overreached itself.
"But I'm also not going to deny that if you look at some of the decisions, which were taken in the past, then you can say that probably they were done at the wrong moment. That the timing was not correct," Dierckx said.
Elsewhere in Europe, Germany's No. 2 commercial property lender became the first German blue chip company to seek a bailout from the government. The government in Iceland said it has taken control of that country's third-largest bank.
Not All Doom And Gloom
But on Monday, on the streets of the financial district in London, known as the Square Mile, it wasn't all doom and gloom.
City workers Sergio Baratesta and Tom Hodges even suggested that the worst may have have passed.
"I don't think it will get any worse," Baratesta said. "I think we got to the bottom at the moment. It cannot get worse. It's looking like its going to be tough — hard to recover — but I think it is going to get better, from now on."
Hodges said he thinks people are getting used to not borrowing and spending as they used to.
Perhaps banks are even returning to some of those quaint, old-fashioned concepts of banking.
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