Credit Crisis Goes Global

Bank rescues, worries hit Europe, Asia.


If the single largest job of the government's $700 billion bailout plan was restoring confidence in the markets, it may already have failed.

Another Monday-morning massacre is slamming Wall Street today after traders around the world woke up to banking problems in their own backyards and saw little reason to hope for immediate help from America's newly inked bailout plan.

Stocks are plummeting across the globe today as the credit crisis spreads to the rest of the world.

Some highlights:

BNP Paribas is taking over Fortis in a $19.7 billion deal.

Germany is working to save Hypo Real Estate, a huge commercial property lender, and formulate its own financial security plan, including guaranteeing all bank deposits, a move Italy, Greece, and others are following.

Spain is holding emergency meetings with banks.

European markets fell more than 6 percent. Asian stocks plummeted, too.

The fallout:

The FT makes the case for a European rescue plan, noting that the credit crisis could be worse there because “a systemic banking crisis is one of those few conceivable shocks with the potential to destroy Europe's monetary union.” So the worst-case scenario is now goodbye, euro?

Meanwhile, the U.S. banking sector isn't responding well either, despite the passage of the $700 billion bailout plan, which now has to be enacted by Treasury as fast as possible.

Bank stocks are crumbling again:

Cleveland-based National City is down more than 22 percent today. Regions Financial, Sovereign Bancorp, and KeyCorp are all off more than 10 percent.

So what's the latest fix? As Europe scrambles, expect a possible flurry of interest rate cuts from central bankers.

Floyd Norris notes at the NYT:

The risk there is that it would not work, or at least not seem to work, and the chorus about “pushing on a string” would grow louder. But I doubt the central banks will be able to stand by if the market carnage continues very long. There is certainly enough economic weakness to justify action, and plunging commodity prices provide reasons to put aside inflation concerns.