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America may fight back with $7 trillion savings guarantee
10.10.08
The US Government is considering a staggering $7 trillion (£4.1 trillion) guarantee of all savers' deposits in a desperate bid to end the crisis in the banking system.
Senior officials in Washington are discussing temporarily backing all US bank deposits if economic conditions worsen as banks buckle under the strain of nervous investors withdrawing cash.
Similar steps have already been taken by several European countries including Ireland, Germany and Denmark, while the UK Government raised its guarantee on individual bank deposits from £35,000 to £50,000.
“Our European friends have done it, so there will be great pressure to follow,” said William Seidman, former chairman of Federal Deposit Insurance Corp, which already insures $5.2 trillion of US deposits.
There are concerns that if the authorities do not act customers with large deposits in US banks will move their cash overseas to countries offering more insurance.
Camden Fine, chief executive of the trade group Independent Community Bankers of America, said: “I think that lifting the cap entirely is something that may have to be done in the next few weeks.”
It came as the Group of Seven leading industrial nations met in Washington to discuss the UK's
£500 billion bank bailout unveiled this week.
Gordon Brown today called on nations around the world to follow Britain's lead and plough funds into struggling banks and offer guarantees to get banks lending to each other again.
White House spokesman Tony Fratto said the US “is reviewing the idea and discussing it with our British counterparts”.
President Bush was due to make a statement on the global financial meltdown today.
US stocks crashed to a five-year low last night with the Dow Jones Average down more than 7% at 8579.19 on growing fears that the $700 billion bailout of US banks will not prevent recession.
Reader views (1)
The game is up. For years politicans accross the world have said you can have a much better life if you simply vote for me. They have financed final salary pensions, healthcare, housing, public sector spending and wage increases by debt. The illusion continued so long as investors brought Govt debt. The bills are due yet they cannot be paid becuase the trouble is the global debt problem is so big that no one can or even if they could afford to buy all US, UK,and EU Govt debt why would they want to take the risk? The problem is going to get even worse due to tiny flaw in the pension schemes throughout the world. By law you have to withdraw your money from the stockmarket in the form of an annuity at the age of 75. When the baby boomer generation withdraws their money from world stock markets at roughly the same time this current crisis will look like a walk in the park. The problem will start coming to light roughly around 2010 and will probably turn into a global depression. When that happens you will see the rise of economic nationalism, protectionism, a polorisation of the political system and wars over precious resources which is a direct consequences of world over population.
- Rupert, London
