September 28, 2008
The financial system could face a meltdown of 1929 proportions unless US politicians succeed in their efforts for a $700bn rescue scheme, experts added.
The warning came as Republicans and Democrats met in Washington for a rare weekend debating session to attempt to seal agreement on the contentious plan, aimed at preventing a long-lasting recession in the US.
Officials close to Paulson are privately painting a far bleaker portrait of the fragility of the global economy than that advanced by President George W Bush in his televised address last week.
One Republican said that the message from government officials is that “the economy is dropping into the john.” He added: “We could see falls of 3,000 or 4,000 points on the Dow [the New York market that currently trades at around 11,000]. That could happen in just a couple of days.
“What’s being put around behind the scenes is that we’re looking at 1930s stuff. We’re looking at catastrophe, huge, amazing catastrophe. Everybody is extraordinarily scared. It’s going to be really, really nasty.”
Investors fretted about contagion into Europe, where Fortis, which was part of the consortium that bought ABN Amro last year, fired its chief executive after liquidity concerns pushed shares down more than 20pc to a 14-year low. Holland’s ING and BNP Paribas are looking at buying the bank this weekend.
This article was posted: Sunday, September 28, 2008 at 5:18 pm