Financial Crisis: Brits Step In

By Reuters -  |  Posted 2008-09-16 Email Print this article Print
 
 
 
 
 
 
 

AIG stock is tumbling. The cost of borrowing between banks surged as financing troubles piled up for AIG and the markets faced further fallout from the failure of investment bank Lehman Brothers. The insurer has "a day" to solve its problems, New York Gov. David Paterson said. A failure would result in a "catastrophic problem" for the market accordign to the Governor.

BRITS STEP IN

Barclays -- which quit frantic talks over the weekend to rescue Lehman after U.S. authorities failed to guarantee trading obligations -- is now looking to buy Lehman's U.S. broker-dealer business, including equity, fixed income, M&A advisory and other parts, the sources said.

The talks mainly involve the core U.S. business, with 8,000 to 10,000 staff, but could include some of its global businesses, the sources said, and a deal could save thousands of jobs and many of the core investment bank operations.

There is an urgency to the talks, as a deal would need to be struck before staff and clients leave and damage the franchise, the sources said.

Top U.S. savings and loan Washington Mutual saw its rating cut to "junk" status by Standard & Poor's on Monday amid concerns about mortgage losses. Its shares slid in after-hours trading after a 27 percent drop in the regular session.

MARKETS TUMBLE

European credit spreads widened sharply early on Tuesday, surpassing last session's high, after AIG's downgrade.

"The second leg of the subprime crisis has begun," Jun Kwang-woo, head of South Korea's Financial Services Commission, told reporters. "It could be painful, but a recovery, once in place, may be rapid."

Asian stocks tumbled across the board, with Tokyo down more than 5 percent at a three-year low.

Japanese government bond futures jumped by their daily limit of three full points as investors fled to safe havens, while Japan's central bank said it would strive to maintain stability in financial markets.

(Additional reporting by Steve Slater, Maya Thatcher, Lilla Zuill, Umesh Desai, Michael Flaherty, Kevin Plumberg, Tom Miles, Steve Johnson and Jon Stempel; Editing by Sue Thomas and John Wallace)



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