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Credit crisis: are you feeling the crunch?
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How the financial crisis went global - bank failures

 


Banks and financial institutions in general rely on each other, so the credit crunch produced an effect like a pack of cards toppling over. With banks refusing to lend each other money, financial institutions are collapsing one after the other. The system of trust on which global capitalism is based is malfunctioning. 

Headlines took a turn for the worse after the fourth biggest investment bank in the US, Lehman Brothers, filed for bankruptcy and was not bailed out, becoming one of the biggest major casualties of the crunch...but not the last. The US government hashed out a bailout plan to inject 700 billion dollars into its banks at the taxpayer's expense. The plan was rejected at first, then voted in by the Senate amid predictions of financial Armageddon if banks were left to go under.  

And the effects of the crisis are being felt around the globe. Struggling UK bank Northern Rock was forced to ask for emergency funding from the Bank of England back in 2007, and was later temporarily nationalized. In October 2008, Gordon Brown and Alastair Darling unveiled a £500 billion bailout plan to bail out RBS, Lloyds TSB and HBOS and free up inter-bank lending.  

Elsewhere in Europe, meanwhile, governments in Italy, France and Germany have all taken measures to protect their financial institutions. Following the part nationalization of Fortis, France, Belgium and Luxembourg are to spend 6.4 billion euros to rescue its rival, Franco-Belgian bank Dexia. 




  
  

Sarah Horrocks
2008/11/03
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