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The global financial catastrophe continues. With the Dow having Jones industrial average having lost $2.8 trillion in value since the day before investors thought the U.S.'s $810 billion bailout plan to save the world would pass, Asian markets cratered today. And the U.K. announced a plan much closer to the one that the U.S. should have been pushing. Maybe it's not too late for us to get it right.
How bad is the carnage in Asia? Japan's Nikkei collapsed 9.4% to close at 9203.32, its biggest one-day percentage drop since 1987 -- it peaked in the late 1980s at around 40,000. Australia fell 5%, South Korea declined 5.8%, Hong Kong tumbled 7%, and Indonesia shut its market for the second time in its history after stocks there plunged over 10%.
Meanwhile the UK did what the U.S. should have done to prop up its banks -- it injected capital into its strongest banks and took back preferred stock. Specifically, the UK bought $88 billion worth of preferential shares in its eight largest banks and building societies. The Bank of England will make $352 billion available for short-term loans and has created a $440 billion loan guarantee fund. And the plan seems to be working as far as boosting investor confidence -- HBOS, one of the capital recipients, saw its stock rise 58%.
Let's hope U.S. leaders get the message from across these ponds.
Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.
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