WKYT | Lexington, Kentucky | News

Markets Stampede Lower; Global Finance Chiefs Meet

Stock markets jolted still lower in the U.S. and around the
world Friday despite all efforts to slow the selling stampede, and
the globe's industrial powers urgently debated forceful new steps
in Washington to prevent a worldwide economic catastrophe.

A sign of how bad things have gotten: A drop of more than 120
points in the Dow Jones industrials was greeted with sighs of
relief after the index had plummeted much further earlier in the
day.

Treasury Secretary Henry Paulson and Federal Reserve Chairman
Ben Bernanke met with their counterparts from the world's six other
richest countries as the rout of financial markets sped ahead in
the face of dramatic rescue efforts in the U.S. and abroad.

Stock prices hurtled downward in the United States, Europe and
Asia, even as President Bush tried to reassure Americans and the
world that the U.S. and other governments were aggressively
addressing what has become a near panic.

"We're in this together and we'll come through this together,"
Bush declared at the White House as finance ministers and central
bankers from around the world gathered nearby. "Anxiety can feed
anxiety, and that can make it hard to see all that's being done to
solve the problem."

On Wall Street, the Dow Jones industrials, already down 21
percent for the week, dropped nearly 700 points more in the opening
minutes but made up much of that fresh loss in the last hour of
trading. The index finished down 128 points for its worst week
ever.

It was no better overseas. Great Britain's FTSE index ended
below the 4,000 level for the first time in five years; Germany's
DAX fell 7 percent and France's CAC-40 finished down 7.7 percent.
Japan's benchmark Nikkei 225 index fell 9.6 percent, also hitting a
five-year low. For the week, the Nikkei lost nearly a quarter of
its value. Russia's market never even opened.

Bush made it clear the United States must work with other
countries to battle the worst financial crisis that has jolted the
world economy in more than a half-century.

"We've seen that problems in the financial system are not
isolated to the United States," he said. "So we're working
closely with partners around the world to ensure that our actions
are coordinated and effective."

The Dow dropped a little over 100 points while he was speaking.

Fear has tightened its grip on investors worldwide even as the
United States and other countries have taken a series of radical
actions including an unprecedented, coordinated interest rate cuts
by the Federal Reserve and other major central banks.

Besides the United States, the other members of the G7 - the
Group of Seven - meeting in Washington are Japan, Germany, Britain,
France, Italy and Canada. Finance officials also planned to meet
with Bush Saturday at the White House.

"We are in a development where the downward spiral is picking
up speed," said Germany's Finance Minister Peer Steinbrueck, who
wants to see an orchestrated response among the G7.

So does French Finance Minister Christine Lagarde, who said a
"coordinated, synchronized and rightly timed approach" was
needed.

An even larger group of nations - called the G20 - will meet
with Paulson on Saturday evening. How the world's finance officials
and central bank presidents can better contain the spreading
financial crisis also will dominate discussions at the weekend
meetings of the 185-nation International Monetary Fund and the
World Bank in Washington.

"Addressing these challenges requires the dramatic steps we are
taking here in the United States and it requires strong
international partnerships," Paulson said this week. "We must
also take care to ensure that our actions are closely coordinated
and communicated so that the action of one country does not come at
the expense of others or the stability of the system as a whole."

Dominique Strauss-Kahn, head of the IMF, which is the world's
financial firefighter, urged countries to work together to come up
with coordinated plans to make sure that squeezed banks and other
financial institutions have access to both quick and longer-term
sources of cash to help them weather the financial storm. He also
said countries should work together to make sure that bank
depositors are adequately protected.

"These actions should help to restore trust and confidence in
financial markets," he said.

The British, who recently announced a plan to guarantee billions
of dollar worth of debt held by major banks, are pitching that idea
to the rest of the G7 members.

"What we have said is that any proposal that's put forward by
one of our global partners, we will take a look at it, we will
review it," said White House press secretary Dana Perino.

Separately, the United States is exploring ways the government
might inject billions into banks in exchange for ownership stakes.
Earlier in the week, Britain moved to pour cash into its troubled
banks in exchange for stakes in them - a partial nationalization.

The idea behind these ideas - as well as bold steps previously
announced in recent weeks - is to get credit flowing more freely
again.

In the United States, hard-pressed banks and investment firms
are drawing emergency loans from the Federal Reserve because they
can't get money elsewhere. Skittish investors have cut them off,
moving their money into safer Treasury securities. Financial
institutions are hoarding whatever cash they have, rather than
lending it to each other or customers.

The lending lockup - which is making it harder and more
expensive for businesses and ordinary people to borrow money - is
threatening to push the United States and the world economy as a
whole into a deep and painful recession.

In Europe, governments have moved to protect nervous bank
depositors. Germany pledged to guarantee all private bank savings
and CDs in the country, and Iceland and Denmark followed suit.
Ireland went even further by also guaranteeing Irish banks' debts.
The United States will temporarily boost deposit insurance from
$100,000 to $250,000 in cases where its banks or savings and loans
fail.

Some economists have suggested the United States move to
temporarily cover all deposits.

Asked whether that was something the Bush administration was
considering, Perino said: "All of those things are questions that
the policymakers can take up and think about, discuss and then once
we have - if we have - a decision about moving forward on any of
those issues, it will either come out of the Treasury Department or
we'll keep you updated."

The Fed, meanwhile, has repeatedly tapped its Depression-era
authority to be a lender of last resort, not only to financial
institutions but also to other types of companies. Earlier this
week, the Fed said it would buy massive amounts of companies'
debts, in another unprecedented effort to break through the credit
clog.

Not everyone favors such drastic actions. Critics worry that the
Fed and the Bush administration are putting billions of taxpayers'
dollars at risk.
---
Associated Press Writers Harry Dunphy, Desmond Butler, Martin
Crutsinger and Deb Reichmann contributed to this report.

(Copyright 2008 by The Associated Press. All Rights Reserved.)


Comments are posted from viewers like you and do not always reflect the views of this station.
powered by Disqus

WKYT

2851 Winchester Rd. Lexington, Ky 40509 859-299-0411 - switchboard 859-299-2727 - newsroom
Copyright © 2002-2014 - Designed by Gray Digital Media - Powered by Clickability 30810149 - wkyt.com/a?a=30810149
Gray Television, Inc.