Danielle_E.
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]Global banks expect to fall under U. S. bailout umbrella
By Nelson D. Schwartz and Carter Dougherty
PARIS: After initial signs they might be left out in the cold, most European and international banks holding substantial amounts of troubled U.S. mortgage debt now expect to be eligible for the $700 billion bailout plan ironed out in Washington over the weekend.
The initial draft released Saturday limited participation to U.S. banks, but after a round of lobbying and intense questions from bankers around the world, a subsequent version on Sunday promised it would also include institutions with substantial operations in the United States.
While that is sure to please foreign bankers and reassure global markets, it also is expected to stoke some opposition among lawmakers in Congress who are already skeptical of what could ultimately turn out to be a trillion-dollar bailout for Wall Street.
If the plan passes Congress and is signed into law, the benefits would be substantial for some of the largest European banks.
UBS, the Swiss giant, has been among the hardest-hit institutions in the world; both its chairman and chief executive left amid more than $40 billion in write-downs. Even so, it still retains roughly $20 billion more in potential exposure to the troubled U.S. housing market.
On Sunday, Treasury Secretary Henry Paulson Jr. opened the door to foreign bank participation, but he hinted that other countries might have to help shoulder part of the burden for their own banks in what was likely to be the biggest government bailout ever.
"It's a distinction without a difference whether it's a foreign or a U.S. one," he said during an interview on the Fox News television channel. "Our system's a global one, and I also am going to be pressing colleagues around the world to design similar systems for their banks."
The Bush administration is also making its own demands on foreign governments. The request will be discussed during a conference call among Group of Seven finance ministries scheduled for Sunday evening Washington time, a European official said.
"We have a global financial system and we are talking very aggressively with other countries around the world, and encouraging them to do similar things, and I believe a number of them will," Paulson said.
But he may get a lukewarm reaction at best from Europe, where major governments have struggled to get budget deficits under control in the past few years. The German government, for example, has discouraged talk of a stimulus package, and British officials said Sunday that they were not working on a U.S.-style plan.
Gaining access to the bailout for foreign financial institutions with banking operations in the United States was a top priority for Europeans, according to people in industry and government.
They argued that the reputation of Wall Street and the U.S. government would suffer immensely if properly licensed foreign banks in the United States were shut out of the system.
"Who would open a bank again in the United States?" one executive of a major European bank said.
Despite the varying versions of the proposal circulating in Washington, U.S. officials reassured their European counterparts that the umbrella would be broad.
But like many others involved in resolving the crisis, they are pressing to see an updated plan in writing, especially since the definitions of what is a European or American bank have blurred in recent years with the growth of global giants like HSBC, Barclays and Deutsche Bank.
Deutsche Bank, for example, became a major player in the United States with its acquisition of Bankers Trust in 2001. It has written down more than $11 billion in investments linked to the subprime crisis.
Barclays, meanwhile, is on course to buy a significant portion of the North American operations of Lehman Brothers, the 158-year firm whose bankruptcy a week ago helped set off the global financial panic that forced Washington to act.
Officials at several major European banks declined to comment for the record on how they would fare under the bailout package, saying they still needed time to study the proposal.
The plan appears to offer the biggest benefits for the European banks that both have licensed operations in the United States, and have incurred major losses from mortgage-linked securities.
"These are Americans who work in New York," said the executive, who requested anonymity because the U.S. plan is still in flux. "And they are working for a bank that was incorporated in the United States."
If a battle does develop in Congress over foreign participation, UBS, among others, is poised to make just these arguments. Officials at UBS, based in Zurich, point out that the bank employs more than 30,000 Americans, is listed on the New York Stock Exchange and owns two broker-dealers registered under U.S. laws, UBS Securities and UBS Financial Services, better known to Americans as the former Paine Webber unit.
By Nelson D. Schwartz and Carter Dougherty
PARIS: After initial signs they might be left out in the cold, most European and international banks holding substantial amounts of troubled U.S. mortgage debt now expect to be eligible for the $700 billion bailout plan ironed out in Washington over the weekend.
The initial draft released Saturday limited participation to U.S. banks, but after a round of lobbying and intense questions from bankers around the world, a subsequent version on Sunday promised it would also include institutions with substantial operations in the United States.
While that is sure to please foreign bankers and reassure global markets, it also is expected to stoke some opposition among lawmakers in Congress who are already skeptical of what could ultimately turn out to be a trillion-dollar bailout for Wall Street.
If the plan passes Congress and is signed into law, the benefits would be substantial for some of the largest European banks.
UBS, the Swiss giant, has been among the hardest-hit institutions in the world; both its chairman and chief executive left amid more than $40 billion in write-downs. Even so, it still retains roughly $20 billion more in potential exposure to the troubled U.S. housing market.
On Sunday, Treasury Secretary Henry Paulson Jr. opened the door to foreign bank participation, but he hinted that other countries might have to help shoulder part of the burden for their own banks in what was likely to be the biggest government bailout ever.
"It's a distinction without a difference whether it's a foreign or a U.S. one," he said during an interview on the Fox News television channel. "Our system's a global one, and I also am going to be pressing colleagues around the world to design similar systems for their banks."
The Bush administration is also making its own demands on foreign governments. The request will be discussed during a conference call among Group of Seven finance ministries scheduled for Sunday evening Washington time, a European official said.
"We have a global financial system and we are talking very aggressively with other countries around the world, and encouraging them to do similar things, and I believe a number of them will," Paulson said.
But he may get a lukewarm reaction at best from Europe, where major governments have struggled to get budget deficits under control in the past few years. The German government, for example, has discouraged talk of a stimulus package, and British officials said Sunday that they were not working on a U.S.-style plan.
Gaining access to the bailout for foreign financial institutions with banking operations in the United States was a top priority for Europeans, according to people in industry and government.
They argued that the reputation of Wall Street and the U.S. government would suffer immensely if properly licensed foreign banks in the United States were shut out of the system.
"Who would open a bank again in the United States?" one executive of a major European bank said.
Despite the varying versions of the proposal circulating in Washington, U.S. officials reassured their European counterparts that the umbrella would be broad.
But like many others involved in resolving the crisis, they are pressing to see an updated plan in writing, especially since the definitions of what is a European or American bank have blurred in recent years with the growth of global giants like HSBC, Barclays and Deutsche Bank.
Deutsche Bank, for example, became a major player in the United States with its acquisition of Bankers Trust in 2001. It has written down more than $11 billion in investments linked to the subprime crisis.
Barclays, meanwhile, is on course to buy a significant portion of the North American operations of Lehman Brothers, the 158-year firm whose bankruptcy a week ago helped set off the global financial panic that forced Washington to act.
Officials at several major European banks declined to comment for the record on how they would fare under the bailout package, saying they still needed time to study the proposal.
The plan appears to offer the biggest benefits for the European banks that both have licensed operations in the United States, and have incurred major losses from mortgage-linked securities.
"These are Americans who work in New York," said the executive, who requested anonymity because the U.S. plan is still in flux. "And they are working for a bank that was incorporated in the United States."
If a battle does develop in Congress over foreign participation, UBS, among others, is poised to make just these arguments. Officials at UBS, based in Zurich, point out that the bank employs more than 30,000 Americans, is listed on the New York Stock Exchange and owns two broker-dealers registered under U.S. laws, UBS Securities and UBS Financial Services, better known to Americans as the former Paine Webber unit.
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, lol, like one of the islands.
