Word: iceland
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...want to restore confidence in stock markets and among financial institutions, recapitalize your banks - quickly. This message already has some traction in Washington. The U.S. Treasury Department is discussing a plan to use public funds to recapitalize banks. The U.K. government already took that step earlier this week, while Iceland has nationalized its banks...
...British plan - isn't an option everywhere. Banks have become so big and so leveraged that their balance sheets can exceed the gross domestic product of the country in which they are based. That's the case in Belgium, the Netherlands and a host of smaller countries, including Iceland, where on Oct. 6 the Prime Minister warned about the possibility of a "national bankruptcy" because several banks with assets larger than the country's entire economy ran into trouble. Uncertainties about crisis-management efforts are contributing significantly to the market instability...
...Europe was looking askance not just at the U.S., but also at tiny Iceland, whose government on Monday completed what amounts to an emergency seizure of its oversized banking sector. Prime Minister Geir Haarde went on television Monday night to warn his compatriots that "the Icelandic economy, in the worst case, could be sucked with the banks into the whirlpool, and the result could be bankruptcy." That's not just talk: Iceland's GDP amounts to less than one-tenth of the total assets of its three biggest banks, all of which are in trouble. British financial authorities warned...
...borders. Certainly Germany's unilateral action didn't help European markets resist a strong downward trend from Asia, and indexes plunged on Monday, with the FTSE 100 in London, the CAC 40 in Paris and the DAX in Frankfurt each falling around 6% as morning trading opened. By midmorning, Iceland had suspended trading altogether in financial shares...
...Sept. 29 alone, governments from Germany to Iceland rushed to prop up five ailing financial institutions with huge cash infusions or full-blown nationalization, making it one of the grimmest days in the history of European finance. Among the high-profile casualties were Fortis, Belgium's largest bank; the venerable British mortgage lender Bradford & Bingley; and Germany's Hypo Real Estate, which has a massive $560 billion balance sheet and is a big player in the domestic securities market. As the governments stepped in, the message they sent to the public was supposed to be reassuring: Don't panic - your...