The world re­acts: Wall Street woes rip­ple across global mar­kets

The Washington Times Weekly - - International Perspective - BY DAVID R. SANDS

Spain and Tai­wan are crack­ing down on short sell­ers of stock. Bri­tain’s prime min­is­ter sees his poll num­bers plum­met, while Ja­panese fi­nan­cial giants snap up pieces of dis­tressed U.S. lenders. And some in France and Ger­many are hail­ing what they see as a hu­mil­i­at­ing blow to “An­glo-Saxon” eco­nomics.

As the U.S. gov­ern­ment strug­gles to get a han­dle on Wall Street’s melt­down, the eco­nomic, po­lit­i­cal and even cul­tural ef­fects are be­ing felt around the globe.

Spain, Aus­tralia, Tai­wan and the Nether­lands are among the more than a dozen na­tions that have fol­lowed Wash­ing­ton’s lead in plac­ing new re­stric­tions on short sell­ers, in­vestors who profit by bet­ting that a stock will go down. Short sell­ers have been widely blamed with ac­cel­er­at­ing the panic by tar­get­ing the stocks of shaky fi­nan­cial com­pa­nies.

Madrid’s Na­tional Com­mis­sion on Mar­ket Val­ues is­sued tem­po­rary new rules re­quir­ing short sell­ers to de­clare any po­si­tion greater than 0.25 per­cent of a stocks’s to­tal value in a range of Span­ish banks and in­sur­ance com­pa­nies.

Fi­nance min­is­ters in Ger­many, France and Ja­pan all voiced sup- port for the U.S. $700 bil­lion res­cue plan, de­signed to take huge num­bers of bad home loans off the mar­ket and get banks lend­ing again. But none of the coun­tries said it planned a sim­i­lar bailout at home.

“There is no need to take action in Ja­pan,” Fi­nance Min­is­ter Bun­mei Ibuki told re­porters in Tokyo on Sept. 22 af­ter a con­fer­ence call of the Group of Seven fi­nan­cial min­is­ters. Ja­pan’s banks, re­cov­er­ing from more than a decade of bad loans and min­i­mal growth, do not have ma­jor hold­ings in the U.S. have bat­tered the poll num­bers of Prime Min­is­ter Gor­don Brown. Mr. Brown ad­dressed a ma­jor La­bor Party con­fer­ence on Sept. 22 amid grow­ing talk that he may face a chal­lenge to his lead­er­ship.

Mr. Brown’s speech “to a rat­tled and re­bel­lious La­bor Party will de­cide if he sur­vives as prime min­is­ter — or leaves Down­ing Street in ab­ject hu­mil­i­a­tion,” Bri­tain’s best­selling tabloid, the Sun, pro­nounced in an ed­i­to­rial be­fore the speech.

Across the English Chan­nel, many in West­ern Europe are tak-

Some in France and Ger­many are hail­ing what they see as a hu­mil­i­at­ing blow to “An­glo-Saxon” eco­nomics.

mort­gage mar­kets, Mr. Ibuki said.

Some top Tokyo lenders are even treat­ing the U.S. eco­nomic mess as a buy­ing op­por­tu­nity.

Mit­subishi’s fi­nan­cial arm on Sept. 22 an­nounced an $8.5 bil­lion deal to pur­chase up to 20 per­cent in strug­gling Wall Street ti­tan Mor­gan Stan­ley, amid talk that No­mura Hold­ings is pre­par­ing a bid to buy the Asian op­er­a­tions of bank­rupt in­vest­ment bank Lehman Broth­ers.

In Bri­tain, trou­bles in the do­mes­tic hous­ing and bank­ing sec­tors ing a per­verse sat­is­fac­tion in see­ing the staunchly free-mar­ket Bush ad­min­is­tra­tion des­per­ately seek­ing a mas­sive gov­ern­ment bailout to save a vi­tal na­tional in­dus­try — some­thing Amer­i­can cham­pi­ons of cap­i­tal­ism have long de­nounced EU gov­ern­ments for do­ing.

Alabama Sen. Richard C. Shelby, rank­ing Repub­li­can on the Se­nate Com­mit­tee on Bank­ing, Hous­ing and Ur­ban Af­fairs, said two weeks ago that he had dif­fi­culty sup­port­ing a U.S. bailout be­cause “it sounds like France to me.”

Bernard Carayon, a mem­ber of the French par­lia­ment from the party of Pres­i­dent Ni­co­las Sarkozy, praised what he called the U.S. gov­ern­ment’s “prag­ma­tism and in­ci­sive­ness.”

“The state ex­ists for the com­mon good and so it’s nat­u­ral that they in­ter­vene,” he told Bloomberg News. “I’m sure our Amer­i­can friends will draw all the nec­es­sary lessons from a reg­u­la­tory and ac­count­ing point of view.”

Adding in­sult to in­jury, French banks have moved to boost their own cap­i­tal base — not with gov­ern­ment money but through pri­vate eq­uity of­fer­ings. Three of France’s big­gest lenders have raised or are seek­ing nearly $20 bil­lion in new funds from share­hold­ers or from is­su­ing new stock.

Of­fi­cials in Swe­den, long con­sid­ered the clas­sic Euro­pean so­cial wel­fare state, are trum­pet­ing the fact that the res­cue plan fash­ioned by Trea­sury Sec­re­tary Henry M. Paul­son Jr. and Fed­eral Re­serve Chair­man Ben S. Be­nanke is in­spired in part by a sim­i­lar Swedish bailout of trou­bled banks in the 1980s. Swedish fi­nance of­fi­cials have even briefed their U.S. coun­ter­parts on the plan in re­cent days.

In Ger­many, con­ser­va­tive Chan­cel­lor An­gela Merkel had some un­usu­ally pointed crit­i­cism for U.S. and Bri­tish fi­nan­cial reg­u­la­tors, say­ing they ig­nored her calls for greater cor­po­rate fi­nan­cial trans­parency and dis­clo­sure at pre­vi­ous Group of Eight sum­mits.

“I crit­i­cize the mar­kets’ as­sump­tion that they’re [al­ways] in the right,” Mrs. Merkel told the Mu­nich Merkur news­pa­per. “Sadly, backed by the gov­ern­ments in Great Bri­tain and the U.S., they’ve re­sisted vol­un­tary reg­u­la­tion.”

Fi­nance Min­istry spokesman Torsten Al­big told re­porters in Berlin, “The An­glo-Sax­ons are mov­ing mas­sively in our di­rec­tion.”

But it is Ger­many that has seen per­haps the most em­bar­rass­ing for­eign scan­dal re­lated to the Wall Street cri­sis.

Three top ex­ec­u­tives at KFW, a state-owned de­vel­op­ment bank, have been sus­pended af­ter the rev­e­la­tion that the bank er­ro­neously wired some $426 mil­lion to Lehman Broth­ers in New York just as the in­vest­ment bank was declar­ing bank­ruptcy. It is not clear whether any of the money can be re­cov­ered at what one news­pa­per has dubbed “Ger­many’s dumb­est bank.”

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