US lets 10 big banks start repaying bailout money

The US government has cleared the way for 10 big banks to start repaying billions of dollars in bailout funds, a crucial step in easing the adminstration' grip after an unprecedented series of interventions.

The banks were deemed strong enough to leave the Troubled Asset Relief Programme (TARP) after months of lobbying and strong performances on recent stress tests, the New York Times reported Tuesday.

The banks are expected to return about $68.3 billion to the Treasury Department, more than double the administration's initial estimate of about $25 billion in funds to be returned this year. The timetable is also earlier than government officials originally intended.

"These repayments are an encouraging sign of financial repair, but we still have work to do," Treasury Secretary Timothy F. Geithner said in a statement.

Although the Treasury Department did not identify the banks, the Times cited people briefed on the situation as saying they include American Express, Bank of New York Mellon, the BB&T Corporation, Capital One Financial, Goldman Sachs, JPMorgan Chase, the State Street Corporation and US Bancorp.

All passed the stress test and applied to return their TARP funds. Another bank, Morgan Stanley, which needed to raise $1.8 billion after the stress test, was also said to have received permission, as was Northern Trust, a large custodial bank that did not undergo the stress test.

The $68.3 billion represents about a quarter of the TARP money given to banks. So far, 22 small community banks have been allowed to return $1.9 billion in government money.

Within the next few days, the big banks will be able to wire the money back to the Treasury Department. Still, they will not fully get out from under the government's thumb until they rid themselves of warrants giving taxpayers a share of the potential upside on their investments.

Analysts cited by the Times said warrants for the 10 big banks could be worth as much as $4.6 billion. Treasury officials have not disclosed how they plan to value and sell them.

Markets open lower as US auto bailout fails

Investors woke up to a weak stock market as sentiments plummeted with a failed bailout of the US auto industry and a key Indian market opening with a loss of 294.84 points or 3.06 percent one hour into trading.

The failed bailout will affect a lot of Indian auto ancillary companies who were involved in exports to the Big Three US auto companies.

The sensitive index (Sensex) of the Bombay Stock Exchange (BSE) stood at 9,350.62 points against the previous close of 9,645.46 points.

The broader-based 50-share S&P CNX Nifty of the National Stock Exchange (NSE) also fell with a fall of 86.6 points or 2.97 points and was ruling around 2833.55 points.

Key benchmark indices saw a slide with almost all the BSE sectoral indices showing a negative trend.

US markets also fell with a key index of the New York Stock Exchange (NYSE) finishing 126.34 points lower or 2.24 percent. The Nasdaq index closed 3.68 percent lower than its previous close.

The Nikkei, a key index of the Tokyo Stock Exchange, was ruling 5.37 percent lower than Thursday's close while the Hang Seng of the Hong Kong Stock Exchange fell by 6.9 percent over its previous close.

Britain launches 500-bn pound bailout package

British Prime Minister Gordon Brown Wednesday announced an unprecedented 500-billion pound bailout package as central banks around the developed world cut interest rates in a coordinated move aimed at rescuing the global economy from a crippling credit crunch.

In a series of steps announced early Wednesday morning, the British government said it was making available an amount of 50 billion pounds to eight banks and building societies to enable them to continue lending to small businesses and individual home-buyers.

The government also made available 200 billion pounds in short-term loans from the Bank of England, and up to 250 billion pounds in loan guarantees at commercial rates to encourage banks to lend to each other.

In what Brown described as a “bold solution", British banks in exchange will have to agree to controls - they will not only continue lending to small businesses and individuals at existing rates but also place limits on huge executive pays and rewarding bankers who take excessive risks.

The government said it expected to recoup the money in three years' time.

The steps, aimed at improving the flow of cash in the British economy and described as part-nationalisation of the eight banks and building societies, came as central banks in the US, Britain and across Europe cut interest rates in order to kick-start lending.

The Bank of England cut interest rates by 0.5 percent Wednesday, meeting a day before it was meant to - only the second time it has brought ahead the meeting, the first being in the aftermath of 9/11.

Gordon Bown told a Downing Street news conference: "Extraordinary times call for bold and far-reaching solutions.

"Our stability and restructuring programme is comprehensive, it is specific and it breaks new ground. This is not a time for conventional thinking or outdated dogma but for the fresh and innovative intervention that gets to the heart of the problem."

"All these are investments being made by the government, which will earn a proper return for the taxpayer. This support is on commercial terms. We expect to be rewarded for the support we provide," he added.