Britain is currently facing many of the same problems as America like rising mortgage payments and soaring food and fuel costs along with the fear of a recession. The bank issues that the US is facing now closely mimics the bank issues that Britain is facing. For instance Washington Mutual, the giant mortgage lender which had assets valued at $307bn, was sold to its rival Citigroup around September 25. In Britain the mortgage lender Bradford & Bingley was nationalised on the 29th of September. The British government took control of the bank's £50bn mortgages and loans, while its savings operations and branches were sold to Spain's Santander.
The UK's reaction to the US House of Representatives rejection of the bailout plan seems to be very disappointed. Gordon Brown seems especially disappointed in the decision and claims that Britain has taken decisive action to ensure the stability of their system and will take whatever action necessary to ensure the stability of their system. With the failure of the bailout plan the uncertainties surrounding how banks will deal with their exposure to toxic loans and how credit markets can begin to operate more normally are left unsolved, I think the US and Britain are headed for even worse economic troubles. With Gordon Brown's claims of decisive action maybe Britain will come up with a solution to the current financial crisis. However, it appears that the Bush administration and congressional leaders are scrambling to reintroduce the bill again on Thursday. I don't think the bailout plan is the best idea but something needs to happen before the situations in the US and Britain gets even worse.
Monday, September 29, 2008
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3 comments:
These parallels between Britain and the US is pretty interesting...
If this rejection of the bailout plan is going to act as a sort of milestone to signify the start of some sort of huge economic disaster for the US of A (I really really really x10^9 hope not), and if Britain is headed a similar course, then what kind of effect will this have on the world? Having never taken economics (being in gov. :D), I have no idea what it may mean to the world... Is the U.S. and Britain major enough that an economic depression would dramatically affect other countries?
Anyone who might know want to enlighten me? Are we up a creek without a paddle?
I think the reason Great Britain was able to react to this crisis with such rapidity is because the British don't hold the same irrational fear of anything socialist that us Americans do. If our politicians didn't have to fear the stigma of being labeled as socialist they would be able to take much more drastic and thorough action.
Well, as we talked about in class... one of the big reasons of the rejection of this plan was the idea that it was "bad". The public really think it's just a big "save the fatcats" initiative, when really it's a "save the economy" thing.
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