Tuesday, September 30, 2008

Are Europeans doing any better with their financial markets?

Not only does the US have financial issues but so does England, Belgium, Germany...
Many countries like the US are creating bailouts and Darwin-like behavior to internalize overweighted companies by transferring assets to neighboring institutions.
A few examples of those companies suffering under their own type of financial difficulty have somewhat different theories of bailout... Could we impart some of these theories in the US? Or are our problems much more complex than these following examples?

-Fortis= Dutch Central Banking and Insurance Co. that according to Wikipedia is a "banking, insurance, and investment management company is the 20th largest business in the world by revenue". Fortis operations are based in the Benelux countries( the Economic Union in Western Europe) which is composed of Belgium, Netherlands, and Luxemburg. Fortis' banking operations include network (retail), commercial, and merchant banking; its insurance products include life, health, and property/casualty lines. Products are sold through independent agents and brokers, financial planners, and through Fortis Bank branches. It is listed on the Euronext Brussels, Euronext Amsterdam, and Luxembourg stock exchanges.

How the government or investors are trying to fix the companies assets from buying out smaller companies and trying to remain afloat.

- Lets other companies (A) in the market internalize risks by letting companies A ( insitutions that take some of the overbearance of assets by purchuse of companies or other banking or insurance institutions) from companies B that reduce thier load to buy less risky investments.

- When purchuses occur between seller and buyer of assets there is set policies or condtions of the ammount of risk that a company buys.
* These two theories may not work however because there is still no injection into the banking system because of uncertainty of Chinese buyer. But the idea that these institutions it appears to me can buy and sell amongst themselves before asking for bailout money from the government.

Fortis's Story from International Herald Tribune: Link- http://www.iht.com/articles/ap/2008/09/30/business/EU-Netherlands-Fortis.php

Fortis NV announced a series of moves late Tuesday and early Wednesday that follow from the €11.2 billion (US$16.4 billion) government bailout it received over the weekend to ward off insolvency.
First, Fortis said Ping An, China's second-largest insurer, had pulled out of a €2.15 billion (US$3.39 billion) deal to buy a 50 percent stake in the Dutch-Belgian bank's asset management arm.
The company blamed "current severe market disruption and the ongoing uncertainty in the global capital markets."
Second, it said the Dutch central bank would not approve the sale of some ABN Amro assets in the Netherlands to Deutsche Bank AG, pending further review.
Deutsche Bank had agreed to buy the operations for €709 million (US$1.1 billion), in what was widely considered a bargain given that they had earnings of €140 million (US$221 million) in 2007.

Fortis had been ordered to sell the operations by the European Commission's antitrust regulator in order to gain approval for its €24 billion (US$38 billion) acquisition of ABN Amro's Dutch operations last year.
However, as a condition of the bailout, Fortis must now resell ABN Amro anyway.
The Dutch central bank cited "the exceptional circumstances on international financial markets, the uncertainty with regard to the future (owner of) ABN AMRO Bank and the implications of this uncertainty for all parties involved."
If the sale of the Dutch units to Deutsche Bank are scrapped, then Fortis may get a capital boost.

-Some large banks rather than buying and selling assets amongst each other, sell themselves to private owners to reduce the risk without losing the company.

- There is a financial service authority ( media doesen't seem to describe who) that checks to make sure certain financial decisions seem either sound or legotimate with past contracts (?)

Bradford and Bingley announced to their shareholders that they were to be privately owned by over 50,000 individual owners.

Bradford and Bingley's story according to Times Online: http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article4856317.ece

This alternative theory is still pretty risky especially since a financial service authority and state treasurer are speculating the value of the shares for its respective private owners.

Not sure if these theories would help the US with our current financial standing but they are at least theories rather than blame.
With that said, in closing I found through the internet a British spoof of their take on America's Crisis.

Below a British comedy video about the financial crisis overseas from NPR.


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