Wall Street woes ripple across globe

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Spain and Taiwan are cracking down on short sellers of stock. Britain’s prime minister sees his poll numbers plummet, while Japanese financial giants snap up pieces of distressed U.S. lenders. And some in France and Germany are hailing what they see as a humiliating blow to “Anglo-Saxon” economics.

As the U.S. government struggles to get a handle on Wall Street’s meltdown, the economic, political and even cultural effects are being felt around the globe.

Spain, Australia, Taiwan and the Netherlands are among the more than a dozen nations that have followed Washington’s lead in placing new restrictions on short sellers, investors who profit by betting that a stock will go down. Short sellers have been widely blamed with accelerating the panic by targeting the stocks of shaky financial companies.

Madrid’s National Commission on Market Values issued temporary new rules requiring short sellers to declare any position greater than 0.25 percent of a stocks’s total value in a range of Spanish banks and insurance companies.

Finance ministers in Germany, France and Japan all voiced support for the U.S. $700 billion rescue plan, designed to take huge numbers of bad home loans off the market and get banks lending again. But none of the countries said it planned a similar bailout at home.

“There is no need to take action in Japan,” Finance Minister Bunmei Ibuki told reporters in Tokyo on Monday after a conference call of the Group of Seven financial ministers. Japan’s banks, recovering from more than a decade of bad loans and minimal growth, do not have major holdings in the U.S. mortgage markets, Mr. Ibuki said.

Some top Tokyo lenders are even treating the U.S. economic mess as a buying opportunity.

Mitsubishi’s financial arm Monday announced an $8.5 billion deal to purchase up to 20 percent in struggling Wall Street titan Morgan Stanley, amid talk that Nomura Holdings is preparing a bid to buy the Asian operations of bankrupt investment bank Lehman Brothers.

In Britain, troubles in the domestic housing and banking sectors have battered the poll numbers of Prime Minister Gordon Brown. Mr. Brown was set to address a major Labor Party conference Monday amid growing talk he may face a challenge to his leadership.

Mr. Brown’s speech “to a rattled and rebellious Labor Party will decide if he survives as prime minister - or leaves Downing Street in abject humiliation,” Britain’s best-selling tabloid, the Sun, pronounced in an editorial Monday.

Across the English Channel, many in Western Europe are taking a perverse satisfaction in seeing the staunchly free-market Bush administration desperately seeking a massive government bailout to save a vital national industry - something American champions of capitalism have long denounced EU governments for doing.

Alabama Sen. Richard C. Shelby, ranking Republican on the Senate Committee on Banking, Housing and Urban Affairs, said last week he had difficulty supporting a U.S. bailout because “it sounds like France to me.”

Bernard Carayon, a member of the French parliament from the party of President Nicolas Sarkozy, praised what he called the U.S. government’s “pragmatism and incisiveness.”

“The state exists for the common good and so it’s natural that they intervene,” he told Bloomberg News. “I’m sure our American friends will draw all the necessary lessons from a regulatory and accounting point of view.”

Adding insult to injury, French banks have moved to boost their own capital base - not with government money but through private equity offerings. Three of France’s biggest lenders have raised or are seeking nearly $20 billion in new funds from shareholders or from issuing new stock.

Officials in Sweden, long considered the classic European social welfare state, are trumpeting the fact that the rescue plan fashioned by Treasury Secretary Henry M. Paulson Jr. and Federal Reserve Chairman Ben S. Benanke is inspired in part by a similar Swedish bailout of troubled banks in the 1980s. Swedish finance officials have even briefed their U.S. counterparts on the plan in recent days.

In Germany, conservative Chancellor Angela Merkel had some unusually pointed criticism for U.S. and British financial regulators, saying they ignored her calls for greater corporate financial transparency and disclosure at previous G-7 summits.

“I criticize the markets’ assumption that they’re [always] in the right,” Mrs. Merkel told the Munich Merkur newspaper. “Sadly, backed by the governments in Great Britain and the U.S., they’ve resisted voluntary regulation.”

Finance Ministry spokesman Torsten Albig told reporters in Berlin, “The Anglo-Saxons are moving massively in our direction.”

But it is Germany that has seen perhaps the most embarrassing foreign scandal related to the Wall Street crisis.

Three top executives at KFW, a state-owned development bank, have been suspended following the revelation that the bank erroneously wired some $426 million to Lehman Brothers in New York just as the investment bank was declaring bankruptcy. It is not clear whether any of the money can be recovered at what one newspaper has dubbed “Germany’s dumbest bank.”

But fears that the U.S. panic would spark a global depression appear to be overblown.

After falling sharply as the crisis built, stock markets in Russia, China and “emerging markets” around the globe have bounced back strongly.

The leading index of emerging market stocks jumped 10 percent Friday and was up again in early trading Monday. Russia’s Micex stock index was up 29 percent Friday, the biggest single-day gain in the market’s history.

About the Author
David R. Sands

David R. Sands

Raised in Northern Virginia, David R. Sands received an undergraduate degree from the University of Virginia and a master’s degree from the Fletcher School of Law and Diplomacy at Tufts University. He worked as a reporter for several Washington-area business publications before joining The Washington Times.

At The Times, Mr. Sands has covered numerous beats, including international trade, banking, politics ...

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