Wednesday September 17, 10:11 PM
Financial storm rages with HBOS as latest victim
The global financial firestorm claimed a fresh victim Wednesday as top British mortgage lender HBOS said it was in takeover talks after a huge US bailout of insurer AIG helped underpin volatile share prices.
"In the light of market speculation, the Board of HBOS plc confirms that it is in advanced talks with Lloyds TSB Group plc which may or may not lead to an offer being made for HBOS," HBOS said in a statement, confirming a report on the BBC.
The US Federal Reserve's 85-billion-dollar loan to American International Group, one of the world's largest insurers, meanwhile brought some relief to Asian and European exchanges.
European markets opened on a generally optimistic note after the mega rescue of AIG , yet another victim of the US sub-prime mortgage meltdown, but early gains on leading markets then switched to losses and back to gains.
London's FTSE 100 index of leading shares also switched back and forth from gain to loss in a one-percent range and at mid-day was standing with a gain of 1.29 percent.
Indices moved sharply by the minute as the markets digested the AIG bailout, still anxious about the real state of the world financial system following the dramatic collapse on Monday of US investment bank Lehman Brothers and the sale of Merrill Lynch to Bank of America.
In Paris, the CAC 40 was up 0.44 percent while the Frankfurt Dax had gained 0.60 percent, having both switched into losses earlier in the morning.
A key barometer of tension on European interest rate markets, the Libor rate, fell Wednesday, but another measure of lending between banks, the Euribor rate, was at the highest level this year.
Earlier in the day Asian stocks ended mixed, with investors said to be cautious after the Federal Reserve held its base lending rate at 2.0 percent, arguing that the US economy was likely to achieve "moderate" growth over time despite the financial turmoil.
Dealers had been expecting a quarter point cut.
Markets in Seoul and Tokyo managed to reverse early losses and closed with respective gains of 3.0 percent and 1.21 percent.
But Hong Kong, which had opened 2.1 percent higher, fell back and closed 3.6 percent down, beneath 18,000 points and at its lowest level since October 4, 2006.
But storm clouds quickly gathered over HBOS, which according to the BBC is now in talks that could lead to its takeover by British bank TSB Lloyds.
The BBC report on the HBOS-Lloyds talks sparked a surge in the HBOS share price after it had plunged in chaotic trading this week.
HBOS shares had nosedived 52 percent in early London trading to a low of 88 pence. However, the takeover report helped push the stock back up to 214 pence.
The US government got a 79.9-percent stake in AIG in return for the 85-billion-dollar loan, which followed hard on the heels of its takeover of US mortgage giants Fannie Mae and Freddie Mac.
The US central bank said it had acted to help AIG to "protect the interests of the US government and taxpayers," and the White House insisted that "these steps are taken in the interest of promoting stability in financial markets and limiting damage to the broader economy."
Analysts had warned that at an AIG collapse could trigger a wave of failures elsewhere.
AIG is deeply involved with financial institutions around the world and it was feared that its demise would have disastrous global consequences.
According to the New York Times, of the 441 billion dollars in credit default swaps, the financial instrument that got AIG into trouble, more that three quarters are held by European banks.
Credit default swaps required AIG to insure losses by holders of potentially risky investments, notably mortgage-backed securities that have plunged in value over the last year and have led to massive asset write-downs around the world.
The size and scope of the Fed intervention triggered political controversy in the United States. House of Representatives Speaker Nancy Pelosi railed against what she called "our nation's largest bailout ever."
"An 85-billion-dollar loan is a staggering sum and is just too enormous for the American people to bear the risk," she said in a statement. "Congress will demand answers to prevent this from happening again."
US press comment likewise raised fears that the end could not after all be in sight.
"How far will the bailout binge go?" asked the Los Angeles Times, recalling the recent rescues of mortgage giants Fannie Mae and Freddie Mac.
This year's bailouts, the Times said, amount to "a cornucopia of handouts and guarantees dwarfing the rescue of the savings and loan industry in the 1980s, which ended up costing taxpayers some 124 billion dollars."
In Paris French Finance Minister Christine Lagarde said this week's dramatic developments heralds a major re-configuration.
"We are seeing a transformation of financial markets, of the role of people in finance and of bodies overseeing finance," she told France 24 television.
This year's bailouts, the Times said, amount to "a cornucopia of handouts and guarantees dwarfing the rescue of the savings and loan industry in the 1980s, which ended up costing taxpayers some 124 billion dollars."
Shares in AIG -- a company with one trillion dollars in assets around the globe -- had plunged 60 percent on Monday, slid another 70 percent at the open Tuesday before closing down 21 percent.
In a statement, AIG insisted its insurance, retirement and other financial services "including its extensive Asian operations" were operating normally "and remain adequately capitalized and fully capable of meeting their obligations to policyholders".
Financial storm rages with HBOS as latest victim
The global financial firestorm claimed a fresh victim Wednesday as top British mortgage lender HBOS said it was in takeover talks after a huge US bailout of insurer AIG helped underpin volatile share prices.
"In the light of market speculation, the Board of HBOS plc confirms that it is in advanced talks with Lloyds TSB Group plc which may or may not lead to an offer being made for HBOS," HBOS said in a statement, confirming a report on the BBC.
The US Federal Reserve's 85-billion-dollar loan to American International Group, one of the world's largest insurers, meanwhile brought some relief to Asian and European exchanges.
European markets opened on a generally optimistic note after the mega rescue of AIG , yet another victim of the US sub-prime mortgage meltdown, but early gains on leading markets then switched to losses and back to gains.
London's FTSE 100 index of leading shares also switched back and forth from gain to loss in a one-percent range and at mid-day was standing with a gain of 1.29 percent.
Indices moved sharply by the minute as the markets digested the AIG bailout, still anxious about the real state of the world financial system following the dramatic collapse on Monday of US investment bank Lehman Brothers and the sale of Merrill Lynch to Bank of America.
In Paris, the CAC 40 was up 0.44 percent while the Frankfurt Dax had gained 0.60 percent, having both switched into losses earlier in the morning.
A key barometer of tension on European interest rate markets, the Libor rate, fell Wednesday, but another measure of lending between banks, the Euribor rate, was at the highest level this year.
Earlier in the day Asian stocks ended mixed, with investors said to be cautious after the Federal Reserve held its base lending rate at 2.0 percent, arguing that the US economy was likely to achieve "moderate" growth over time despite the financial turmoil.
Dealers had been expecting a quarter point cut.
Markets in Seoul and Tokyo managed to reverse early losses and closed with respective gains of 3.0 percent and 1.21 percent.
But Hong Kong, which had opened 2.1 percent higher, fell back and closed 3.6 percent down, beneath 18,000 points and at its lowest level since October 4, 2006.
But storm clouds quickly gathered over HBOS, which according to the BBC is now in talks that could lead to its takeover by British bank TSB Lloyds.
The BBC report on the HBOS-Lloyds talks sparked a surge in the HBOS share price after it had plunged in chaotic trading this week.
HBOS shares had nosedived 52 percent in early London trading to a low of 88 pence. However, the takeover report helped push the stock back up to 214 pence.
The US government got a 79.9-percent stake in AIG in return for the 85-billion-dollar loan, which followed hard on the heels of its takeover of US mortgage giants Fannie Mae and Freddie Mac.
The US central bank said it had acted to help AIG to "protect the interests of the US government and taxpayers," and the White House insisted that "these steps are taken in the interest of promoting stability in financial markets and limiting damage to the broader economy."
Analysts had warned that at an AIG collapse could trigger a wave of failures elsewhere.
AIG is deeply involved with financial institutions around the world and it was feared that its demise would have disastrous global consequences.
According to the New York Times, of the 441 billion dollars in credit default swaps, the financial instrument that got AIG into trouble, more that three quarters are held by European banks.
Credit default swaps required AIG to insure losses by holders of potentially risky investments, notably mortgage-backed securities that have plunged in value over the last year and have led to massive asset write-downs around the world.
The size and scope of the Fed intervention triggered political controversy in the United States. House of Representatives Speaker Nancy Pelosi railed against what she called "our nation's largest bailout ever."
"An 85-billion-dollar loan is a staggering sum and is just too enormous for the American people to bear the risk," she said in a statement. "Congress will demand answers to prevent this from happening again."
US press comment likewise raised fears that the end could not after all be in sight.
"How far will the bailout binge go?" asked the Los Angeles Times, recalling the recent rescues of mortgage giants Fannie Mae and Freddie Mac.
This year's bailouts, the Times said, amount to "a cornucopia of handouts and guarantees dwarfing the rescue of the savings and loan industry in the 1980s, which ended up costing taxpayers some 124 billion dollars."
In Paris French Finance Minister Christine Lagarde said this week's dramatic developments heralds a major re-configuration.
"We are seeing a transformation of financial markets, of the role of people in finance and of bodies overseeing finance," she told France 24 television.
This year's bailouts, the Times said, amount to "a cornucopia of handouts and guarantees dwarfing the rescue of the savings and loan industry in the 1980s, which ended up costing taxpayers some 124 billion dollars."
Shares in AIG -- a company with one trillion dollars in assets around the globe -- had plunged 60 percent on Monday, slid another 70 percent at the open Tuesday before closing down 21 percent.
In a statement, AIG insisted its insurance, retirement and other financial services "including its extensive Asian operations" were operating normally "and remain adequately capitalized and fully capable of meeting their obligations to policyholders".
