Estimates of the cost to the German taxpayer of rescuing banks still varied wildly, with high-end guesses coming in at 400 billion euros. The government said it would announce details of the bailout on Monday.

The highest estimate of 400 billion euros ($550 billion) was made by Otto Fricke of the opposition free-market liberal FDP who chairs the Bundestag budget committee, in an interview with a Cologne newspaper, the Koelner Stadt-Anzeiger on Monday, Oct. 13.

 

Members of Chancellor Angela Merkel's Christian Democratic Union (CDU) were tighter in their estimates. They said that if the government's cash injections were lost and all the guarantees were called, the bill would total 250 billion euros.

 

That is roughly the same as Germany's entire annual budget this year of 283.2 billion euros.

Western financial leaders assure an anxious world that all bank deposits will be guaranteed and any necessary steps will be taken, however unorthodox.

 The IMF and G-7 declare they are working to prevent further chaos in the markets and Lehman-style failures. Now the great confidence game begins. In high-powered forums that accompanied the G-7 and International Monetary Fund in Washington this past weekend, Western financial leaders sought to assure panicky bankers and money managers in no uncertain terms that all of the measures needed to halt a worldwide meltdown are in motion.

While short on the details many market analysts had hoped for, the broad brushstrokes of forceful, coordinated action by Western governments were unveiled: No more Lehman Brothers-like failures of major financial institutions will be allowed. All bank deposits will be guaranteed. The banking systems of the G-7 nations will be flooded with almost unlimited liquidity. And if all that fails, any other tool -- regardless of how economically unorthodox -- will be used if needed. The British government's widely anticipated move to take majority control of the Royal Bank of Scotland Group and HBOS is expected to be the first of many such actions across Europe. Fifteen European Union countries that use the euro as currency met in Paris this weekend. They pledged to provide guarantees of new bank debt through 2009, authorize the purchase of preferred shares to invest in problematic banks, and provide recapitalization funds where needed.

Banco Santander of Spain is in advanced talks to acquire Sovereign Bancorp for about $2.5 billion, people briefed on the matter said, as another frantic weekend of talks heralded the next wave of banking consolidation.

Santander, which would gain a larger American presence with the deal, will probably pay around $3.81 a share, or where Sovereign's shares closed Friday. Sovereign, a savings and loan, has been hobbled by bad mortgages during the housing slump.

As banks brace to report a new wave of losses in the third quarter, they are finding it very hard to raise money from private investors. Even stronger institutions, like Bank of America, have struggled to raise new funds.

Treasury Department officials are weighing plans to make direct investments in banks to help them weather the current storm. But weaker ones have already begun reaching out to potential acquirers. The National City Corporation, for example, put itself up for sale last week, people briefed on the situation said.

MOSCOW: The stock market here has swooned so often in recent weeks that regulators have repeatedly shut it down, as if Russia, which aspires to be a financial powerhouse, has become just another bumbling backwater. The oligarchs, those Kremlin-connected magnates who once dazzled the world with their riches, are reeling. And Vladimir Putin is facing a threat to his legacy of bringing growth, stability and a renewed swagger to this nation.

The global financial crisis has not spared Russia, wiping out roughly a trillion dollars in wealth and forcing the government to adopt a broad rescue plan to shore up banks. At stake is the country's robust economy over much of the last decade, which has for the first time given many Russians a taste of comforts long enjoyed in the West.

For now, the damage has been largely limited to the Russian elite. While Russia's stock market has plummeted by about two-thirds since May, more than those in the United States and Western Europe, the country has not yet developed a broad investor class, and most people have not squirreled away their savings in the market.

"We cannot have a healthy economy and sustainable growth unless we have a solid financial sector," said French President Nicolas Sarkozy on late Sunday (12 October), after the hastily arranged summit of the 15-strong euro area.

Leaders of 15-strong eurozone hope their coordinated action will calm the markets

The crisis talks aiming to adapt the bloc's financial markets to better cope with the worst financial crisis since the 1930s led to an agreement on a plan similar to that of Britain's rescue scenario.

"I believe that there is common ground now about what needs to be done," UK Prime Minister Gordon Brown told journalists in Paris after he explained the details of the British approach hours ahead of the eurozone session. The UK remains outside the eurozone.

Under the agreed package, 15 countries plus Slovakia - set to join the euro in January - committed to provide capital for banks striving for funds because of frozen money markets and to help or directly subscribe to debt-raising by banks for up to five years.

European stock markets soared on Monday as Germany, France and other euro zone countries presented their rescue plans to guarantee bank debt and inject capital into the financial sector. But some analysts warn the stock market volatility may not be over.

 Like other European leaders, Germany's Angela Merkel is having to dig deep into her treasury coffers to make up to €500 billion available for her country's financial crisis rescue plan.

Stock markets across Europe soared on Monday as a wave of relief washed over trading floors following Sunday's pledges by European leaders to commit government funds in massive bailout packages.

The German government unveiled a €500 billion ($679 billion) rescue plan to shore up the banking system after Sunday's emergency summit of euro zones nations at which leaders agreed to guarantee new bank debt and inject capital to unfreeze money markets and restore confidence in the financial system.

SPIEGEL spoke with German President Horst Köhler, 65, about the causes of the international banking crisis, the need to reform the financial sector and efforts to introduce effective rules of conduct for the global economy.

German President Horst Köhler, the former head of the International Monetary Fund, blames "collective blindness" and a get-rich-quick mentality for the financial crisis. SPIEGEL: Mr. President, do you own certificates?

Köhler: No, I have never bought them.

SPIEGEL: Are you a shareholder?

Köhler: Not even that.

SPIEGEL: But you do have a savings account?

Köhler: No, but I have something similar: fixed deposits.

SPIEGEL: Have you also recently started putting money under your mattress?

Köhler: Why in the world should I put money under my mattress?

Dominique Strauss-Kahn, the head of the International Monetary Fund, said Oct. 13 that in the current global financial crisis, those governments that could afford it should consider stimulus plans for their economies.

Strauss-Kahn told the annual meeting of the International Monetary Fund and World Bank in Washington that "action in the financial markets is essential, but it is not sufficient.

"We also need to deploy all of the instruments of modern macroeconomic policy to limit the damage to the real economy," he said.

"For the advanced economies, this means using fiscal policy when they can. The most obvious use of fiscal policy is precisely to ease pressures where they are greatest: in the financial and housing sectors.

Europe's developing eastern nations have revealed their vulnerability to the finance crisis, with Hungary, Poland and the Czech Republic all brought down to earth by market shocks.

Budapest was offered financial help by the International Monetary Fund (IMF) on Monday, a move which followed the downscaling of the country's deficit targets and growth forecast.

The country of some 10 million was hit hard by the crisis due to its heavy reliance on foreign financing and a high public deficit, which is estimated at 3.8 percent of GDP for 2008, dropping from 9.2 percent of GDP in 2006.

Hungary's currency, the forint, plunged to two-year lows against the euro on Friday, losing about 10 percent of its value in a day before recovering slightly Monday.

Cash-strapped couples whose socialising has been curbed by the credit crunch could fuel a baby boom as they seek entertainment at home, industry figures say.

Sales of maternity clothes and baby equipment have soared, along with those of pregnancy tests and sex toys.

It comes as home-delivery pizza company Domino's reported a 20 per cent sales rise in the first half of this year, while a report from financial services firm PriceWaterhouseCoopers predicted meals out and trips to the pub would be the first luxuries to go in a recession.

Mothercare said its sales have gone up by more than 20 per cent, while baby clothing firm Mamas And Papas has reported a 46 per cent increase in maternity dress sales.

Chemists around the country have reportedly seen a rise in sales of pregnancy test kits while online company sextoys.co.uk reported a 27 per cent increase in sales.

Germany and France put mountains of cash on the table today as they led continental Europe in an offensive to rebuild trust in banks with state guarantees worth over €1trillion (£780 million).

Chancellor Angela Merkel and President Sarkozy, chiefs of the two big euro-zone economies, also joined Gordon Brown in calling for a deep reform of the global financial system after the dust settles from the autumn earthquake.

"When calm returns, those who have sinned will be punished," Mr Sarkozy said.

The amazing feature of today's crash is how many Wall Street firms actually believed that the game of musical financial chairs could go on before they had to stop dancing and indeed, escape from the room. I remember one day back in the 1970s when I warned Frank Zarb of Lazard Freres about the likelihood of Third World debt defaults, and suggested that the firm should do an ability-to-pay analysis. "We don't have to do any such thing," he replied. "We have the schedule of what they owe right here in this IMF report." It was a thick printout of the scheduled debt service for an African country that soon became insolvent. But Wall Street's mentality was that of Herbert Hoover on the eve of the Great Depression: A debt is a debt, and that is that. The response is to blame the victim, as if the irresponsibility lies with debtors rather than creditors.

....

Instead of requiring creditors to absorb losses on the excess of debts over what can be paid, the debts are being kept in place, not scaled back to what the economy can pay. The government is to make creditors and computerized derivatives speculators whole - and will act as collecting agent for the overhead of bad debts the economy has run up.

Today we can see the debt-fueled bubble of asset-price inflation that Alan Greenspan trumpeted as real wealth creation for what it really is - credit creation to bid up real estate, stock market and packaged-debt prices. Tangible capital formation has been left out of account, as if postindustrial economies no longer need it.

WASHINGTON -- The Treasury Department, in its boldest move yet, is expected to announce a plan on Tuesday to invest up to $250 billion in banks, according to officials. The United States is also expected to guarantee new debt issued by banks for three years -- a measure meant to encourage the banks to resume lending to one another and to customers, officials said.

And the Federal Deposit Insurance Corporation will offer an unlimited guarantee on bank deposits in accounts that do not bear interest -- typically those of businesses -- bringing the United States in line with several European countries, which have adopted such blanket guarantees.

The Dow Jones industrial average gained 936 points, or 11 percent, the largest single-day gain in the American stock market since the 1930s. The surge stretched around the globe: in Paris and Frankfurt, stocks had their biggest one-day gains ever, responding to news of similar multibillion-dollar rescue packages by the French and German governments.

Treasury Secretary Henry M. Paulson Jr. outlined the plan to nine of the nation's leading bankers at an afternoon meeting, officials said. He essentially told the participants that they would have to accept government investment for the good of the American financial system.

]...]

"The Europeans not only provided a blueprint, but forced our hand," said Kenneth S. Rogoff, a professor of economics at Harvard and an adviser to John McCain, the Republican presidential candidate. "We're trying to prevent wholesale carnage in the financial system."

* How do you define optimism? A banker who irons five shirts on a Sunday.

• "It's worse than a divorce. I've lost half my net worth and I still have a wife."

• What's the difference between an investment banker and a large pizza? The pizza can feed a family of four.

• An elderly lady receives an email from the son of a deceased African general, asking to transfer millions of pounds into her account for a 20 per cent cut. All the son needs is her sort code and account number. She emails back the details. A couple of minutes later she receives an email back from the general's son: "icesave? What is this, some sort of scam?"

• Why didn't the little boy get any pocket money? 'Cos his mum's gone to Iceland.

• If you had purchased $1,000 of Nortel stock a year ago, it would now be worth $49.
  

With Enron, you would have $16.50 left of the original $1,000.
With WorldCom, you would have less than $5 left.
if you had bought $1,000 of Delta Airlines stock you'd have $49 left.
With United Airlines, you would have nothing left.
But, if you had purchased $1,000 worth of beer one year ago, drank it and then turned in the cans for recycling, you would have $214. The best current investment advice is to drink heavily and recycle. it is called the 401-Keg Plan.