WALL STREET DIVES! – as Congress argues over Bush plan


THE Treasury yesterday confirmed that Bradford & Bingley’s (B&B) £50bn mortgages and loans will be nationalised.

The mortgage bank’s £20bn savings unit and branches will be bought by the Abbey bank, owned by Spain’s Santander group.

A spokeswoman for Abbey said while it was ‘business as usual’ for B&B’s 197 branches, it was too early to say whether any would close in the long term.

However, with Santander already owning both Abbey and Alliance & Leicester, most are expecting B&B branches will be closed, with the loss of all 3,000 jobs.

Prime Minister Gordon Brown said the move showed the government will ‘do whatever it takes to ensure the stability of the UK financial system’.

He stressed: ‘I will continue to do whatever is necessary in difficult times, turbulent times around the world.’

Chancellor Darling claimed that the move would protect savers’ and taxpayers’ money.

Abbey, which is part of Spanish banking group Santander, is paying £612m to buy B&B’s savings business and 197 branches.

To help facilitate Abbey’s takeover, it has been paid £14.6bn from the Financial Services Compensation Scheme, funded by the Bank of England, and a further £4.5bn from the Treasury.

This £19.1bn is to guarantee that Abbey could pay back all B&B savings account customers, if need be.

Meanwhile, new mortgage lending dramatically collapsed in August, according to the latest figures from the Bank of England.

UK banks and building societies lent an extra £143m in home loans last month, just 5% of July’s lending figure and only 2% of the lending in August 2007.

Across the Atlantic, the House of Representatives gathered to vote on Bush’s $700bn bailout for Wall Street after Wall Street opened 300 points down.

Bush made a statement at the White House before the vote.

He claimed: ‘This bill provides the necessary tools and funding to help protect our economy against a systemwide breakdown.

‘The bill will help allow access to credit so American families can meet their daily needs and American businesses can make purchases, ship goods, and meet their payrolls.

‘And this plan sends a strong signal to markets around the world that the United States is serious about restoring confidence and stability to our financial system.’

However, he warned that the bail-out would not answer all economic woes and that some difficulties would remain.

Soon afterwards it emerged that another US bank had gone belly up.

Wachovia, the fourth-largest US bank, is being bought by larger rival Citigroup in a rescue deal backed by US authorities.

Under the deal, Citigroup will absorb up to $42bn (£23bn) of Wachovia losses and take on $312bn of Wachovia loans.

The Federal Deposit Insurance Corporation (FDIC) said the decision to back the sale had been made ‘under extraordinary circumstances’.

‘This action was necessary to maintain confidence in the banking industry given current financial market conditions,’ said FDIC chairman Sheila Bair.

Shares on the world’s stock markets took a dive, with Wall Street’s Dow Jones Industrial index collapsing by over 300 points while the FTSE 100 index closed down 269 points at 4818 points with £62bn wiped off share prices.