Daily Mail 28th September 2008
Bradford & Bingley will be taken into public ownership today, exposing taxpayers to liabilities running into tens of billions of pounds, the Treasury will announce.
The nationalisation was expected to be confirmed before the stock market opened this morning, in the hope of averting a damaging run on shares. B&B branches were to open today.
In the US, Congressional leaders reached an outline agreement on a $700 billion bank bailout after days of often bitter negotiations. Even as the deal edged closer, another major American bank teetered on the brink.
Wachovia Corp, the country’s sixth largest, risks collapse unless it can find a buyer. Meanwhile, the Dutch-Belgian banking and insurance group Fortis held urgent talks to secure its future and 85,000 jobs across Europe.
The Chancellor, Alistair Darling, was expected to announce that B&B’s £41 billion of mortgages and £9 billion of other loans would be nationalised under legislation passed when Northern Rock went into public ownership a year ago.
B&B spent the day in talks with the Tripartite Authority – the Treasury, the Financial Services Authority and Bank of England. Its £22 billion deposits and 200 branches are being taken over by one or two other banks, talks with which went on all day yesterday. The Treasury was understood to be close to naming the successful bidder or bidders, thought to be Santander and HSBC. The move was criticised by leading Conservatives, although they will not stand in the way of the deal when it comes before the Commons.
Gordon Brown met Mr Darling in No 10 shortly after returning from America on Saturday morning to approve the nationalisation option. Treasury officials worked all weekend on the deal. The Bank of England has apparently been gathering information on B&B from its adviser, Goldman Sachs, for several weeks and had planned a firesale of the assets.
The rescue plan for the US economy could be signed into law by President Bush as early as this week. After marathon negotiations between Hank Paulson, the Treasury Secretary, and leading Republicans and Democrats, a tentative deal was struck that, if passed, will trigger the largest government intervention in the financial markets since the Great Depression.
The deal, the final details of which were being hammered out last night, will be voted on by the House of Representatives as early as today and by the Senate later this week.
Both presidential candidates, John McCain and Barack Obama, said that they would almost certainly back the deal, despite its unpopularity with voters, because the risks of inaction were too great.
After compromises from all sides, the deal would give Mr Paulson $350 billion to start buying toxic mortgage-related assets immediately, with the remaining $350 billion to be approved by Congress. There would be curbs on executive pay and severance packages, a taxpayer stake in the plan, the ability for the government to renegotiate loans for struggling home-owners, and strict oversight.
Warren Buffett, the respected investor, had warned many of those involved that, without a rescue package, the entire US economy could collapse.
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