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Alistair Darling summoned the chief executives of Britain’s biggest banks to Downing Street today to demand that they immediately pass on the Bank of England’s interest rate cut to their customers.

Treasury sources confirmed to The Times that the Chancellor told the heads of all Britain’s big high street lenders - including HSBC, Barclays, Lloyds TSB, HBOS Nationwide and Abbey - to implement rate cuts immediately.

Yesterday, the Bank of England slashed interest rates by 1.5 per cent to 3 per cent, the lowest level in 54 years, and today, the shock reduction helped to ease the strain in nervous money markets.

Libor, which is the rate at which banks lend to each other and is key for pricing mortgages, fell by more than one per cent from 5.561 per cent to 4.496 per cent.

However, the figure remains almost 1.5 per cent higher than the official interest rate.

The spread between the Bank of England’s borrowing cost and the rate that banks charge to borrow money over a three-month period - a key measure in the wholesale money market - is the widest since October 22. The day before, Mervyn King, the Governor of the Bank of England, publicly acknowledged for the first time that a recession in the UK is now likely.

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Tags: Alistair Darling, Bank of England, Banks, Barclays, Economy, Government, HBoS, HSBC, Lloyds TSB, mortgage crisis, Mortgages, Politics, Rate Cut, RBS, taxpayers, U.K.

Stock markets across the world cracked yesterday, forcing Wall Street to suspend trading on a key futures contract to stem panic-selling while Moscow shut for business altogether.

Sharp losses in New York, London, Europe and the Far East raised the spectre that governments may be forced to impose emergency holidays to avert a meltdown across world stock markets.

Before Wall Street opened yesterday, American regulators suspended all trading of Dow Jones futures contracts, which had plunged. Such contracts allow traders to bet on the future direction of the Dow Jones index. The plunge had triggered an automatic circuit breaker, which halts trading to prevent a market sliding into freefall.

Nouriel Roubini, Professor of Economics at New York University, said that his prediction earlier this week that markets would have to be shut down is already coming true.

He said: “This morning, even before the markets in the US opened, the S&P futures fell by more than their daily limit. What I said yesterday has already started.”

A forced closure of stock markets in America would respresent the first time that Washington would have shut Wall Street since the terrorist attacks of September 2001. It would also have echoes of the 1930s, when President Franklin D. Roosevelt shut American banks during an enforced holiday.

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Tags: Bank of England, Barclays, ecomomy, financial crisis, Goldman Sachs, Gordon Brown, HSBC, Morgan Stanley, Nouriel Roubini, Russia, Stock Market, Treasury, U.K., U.S., Wall Street

Oct. 22 (Bloomberg) — Investors are taking losses of up to 90 percent in the $1.2 trillion market for collateralized debt obligations tied to corporate credit as the failures of Lehman Brothers Holdings Inc. and Icelandic banks send shockwaves through the global financial system.

The losses among banks, insurers and money managers may spark the next round of writedowns on CDOs after $660 billion in subprime-related losses. They may force lenders to post more reserves against losses after governments worldwide announced $3 trillion in financial-industry rescue packages since last month, according to Barclays Capital.

“We’ll see the same problems we’ve seen in subprime,” said Alistair Milne, a professor in banking and finance at Cass Business School in London and a former U.K. Treasury economist. “Banks will take substantial markdowns.”

The collapse of Lehman Brothers, Washington Mutual Inc. and the three banks in Iceland prompted Susquehanna Bancshares Inc., a Lititz, Pennsylvania-based lender, to lower the value of $20 million in so-called synthetic CDOs by almost 88 percent last week.

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Tags: Banks, Barclays, Derivatives, Derivatives market, Economy, financial crisis, Iceland, Lehman Brothers, mortgage crisis, Mortgages, Recession, Standard & Poor's, Washington Mutual

Government set to become biggest shareholder in top banks as Japanese weigh bid for Morgan Stanley

THE government will launch the biggest rescue of Britain’s high-street banks tomorrow when the UK’s four biggest institutions ask for a £35 billion financial lifeline.

The unprecedented move will make the government the biggest shareholder in at least two banks.

Royal Bank of Scotland (RBS), which has seen its market value fall to below £12 billion, is to ask ministers to underwrite a £15 billion cash call.

Halifax Bank of Scotland (HBOS), Britain’s biggest provider of mortgages, is seeking up to £10 billion.

Lloyds TSB, which is in the process of acquiring HBOS in a rescue merger, wants £7 billion, while Barclays needs £3 billion.

The scale of the fundraising could lead to trading at the London stock market being suspended. This would give time for the market to digest the impact of the moves.

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Tags: AIG, Bank of England, Barclays, Citigroup, Credit Crisis, credit crunch, Deutsche Bank, Economy, G7, Goldman Sachs, Government, HBoS, HSBC, JPMorgan, Lehman Brothers, Lloyds TSB, Morgan Stanley, mortgage crisis, Mortgages, Politics, RBS, Stock Market, U.K.

Shares in Britain’s banks plunged again amid panicky trading following emergency talks with the government over a possible injection of billions of pounds of taxpayers’ money into the banking sector.

Royal Bank of Scotland nosedived by almost 40% to 90p in morning trading - its lowest point since the recession of the early 1990s. Barclays, Lloyds TSB and HBOS were also hit, as the lack of a coordinated rescue plan for the banking sector alarmed the City.

By 3pm RBS shares were 32.5% lower at 112p, giving it a market capitalisation of £15.98bn - down from over £75bn a year ago.

HBOS was 23% lower at 124p and Lloyds TSB had lost 13% to 225p. Barclays had recovered most of its early losses following Varley’s comments this morning.

Last night Britain’s bank bosses met with chancellor Alistair Darling, to discuss a possible £50bn injection of equity. They are due to meet again at the Treasury this afternoon.

The talks centre on the idea of a part-nationalisation of the banking system through the injection of capital into the banks via preference shares, which take precedence over ordinary shares during a liquidation, but do not give the holders any voting rights.

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Tags: Alistair Darling, Bank of England, Banks, Barclays, Economy, Government, HBoS, Lloyds TSB, Politics, RBS, Stock Market, taxpayers, Treasury, U.K.

Barclays Capital logos are displayed on the facade of the Lehman Brothers Holdings Inc. headquarters building in New York, Sept. 24, 2008. Photographer: Gino Domenico/Bloomberg News

Oct. 1 (Bloomberg) — Lehman Brothers Holdings Inc.’s bankruptcy probably means the end of hedge-fund manager Oak Group Inc. after 22 years in business.

John James, who runs the Chicago-based firm with $25 million of assets, didn’t buy Lehman stock or debt. Instead, his potentially fatal mistake was to rely on the bank’s prime brokerage in London, a unit that provides loans, clears trades and handles administrative chores for hedge funds. He’s one of dozens of investment managers whose Lehman prime-brokerage accounts were frozen when the company filed for protection from creditors on Sept. 15.

“We’re probably going out of business and liquidate, game over,” James, 59, said. “We’ve lost 70 percent of our assets.”

The list of funds trapped in the Lehman morass keeps growing. London-based MKM Longboat Capital Advisors LLP said last week it will close its $1.5 billion Multi-Strategy fund in part because of assets stuck at Lehman, according to an investor letter.

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Tags: bankruptcy, Barclays, Credit Crisis, credit crunch, Economy, hedge funds, Lehman Brothers, Wall Street

Sept. 28 (Bloomberg) — The U.K. government will act to protect Bradford & Bingley Plc customers, Chief Whip Geoff Hoon said after the British Broadcasting Corp. reported the country’s biggest lender to landlords will be taken over by the state.

Prime Minister Gordon Brown and Chancellor of the Exchequer Alistair Darling “have worked right through this weekend to sort out the problems we’re facing,” Hoon, a parliamentary officer, told Sky News today. “I’m confident that in due course there will be a statement from the Treasury about Bradford & Bingley. We will act to ensure that the interests of depositors are properly protected.”

The government will take control of Bradford & Bingley, whose shares have tumbled 93 percent this year, the BBC reported on its Web site, without saying where it got the information. The Treasury and Financial Services Authority will negotiate with banks interested in buying parts of the Bingley, England-based bank, the BBC said. Possible buyers include Banco Santander SA, HSBC Holdings Plc and Barclays Plc, the report said.

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Tags: Alistair Darling, Barclays, Credit Crisis, credit crunch, Economy, Gordon Brown, Government, HSBC, mortgage crisis, Mortgages, Politics, Stock Market, Treasury, U.K.

An office worker looks at a screen showing trading on the FTSE 100 index

TAXPAYERS in Britain face up to 5p in the pound in extra taxes because of the credit crunch created by the banks, leading economists have warned.

After a week of unprecedented financial turmoil, they predict that government borrowing is about to surge as the Treasury’s tax take is slashed by a slump in earnings from the City and the downturn.

Leading forecasters say the government will soon be forced to borrow as much as £100 billion a year, giving Britain easily the biggest budget deficit of any western country.

Any tax rises would come on top of increases imposed by Gordon Brown when he was chancellor. He repeatedly raised indirect “stealth” taxes while leaving income tax unchanged. Taxes went up by 3% of national income, equivalent to more than 10p on the basic rate of income tax.

The warning coincides with news that American executives of the failed Lehman Brothers bank, parts of which were taken over by Barclays last week, will still receive millions in bonuses.

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Tags: Barclays, Credit Crisis, credit crunch, Economy, Gordon Brown, Government, Lehman Brothers, Politics, Treasury, U.K., U.S.

Sept. 15 (Bloomberg) — Lehman Brothers Holdings Inc., the fourth-largest U.S. investment bank, succumbed to the subprime mortgage crisis it helped create in the biggest bankruptcy filing in history.

The 158-year-old firm, which survived railroad bankruptcies of the 1800s, the Great Depression in the 1930s and the collapse of Long-Term Capital Management a decade ago, filed a Chapter 11 petition with U.S. Bankruptcy Court in Manhattan today. The collapse of Lehman, which listed more than $613 billion of debt, dwarfs WorldCom Inc.’s insolvency in 2002 and Drexel Burnham Lambert’s failure in 1990.

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Tags: bank failure, bankruptcy, Banks, Barclays, Bear Stearns, bonds, Citigroup, Credit Crisis, credit crunch, Economy, Fed, Federal Reserve, Government, Henry Paulson, Lehman Brothers, Merrill Lynch, mortgage crisis, Mortgages, Stock Market, taxpayers, Treasury, U.K., U.S., Wall Street

Sept. 14 (Bloomberg) — Bank of America Corp. reached a deal to acquire Merrill Lynch & Co. for about $44 billion, the Wall Street Journal reported, after shares of the third-biggest U.S. securities firm fell by more than 35 percent last week and smaller rival Lehman Brothers Holdings Inc. neared bankruptcy.

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Tags: Bank of America, Barclays, Credit Crisis, credit crunch, Economy, Lehman Brothers, Merrill Lynch, mortgage crisis, Mortgages, rating, Stock Market, U.S., Wall Street