Should we be worried? Brown raises savings guarantee to £50,000 after day of turmoil



Gordon Brown raises savings guarantee from £35,000 to £50,000

HBOS shares drop 20% amid takeover repricing talk

FTSE loses £24bn before rallying with a positive close



Brown holds 'reassuring' media interviews after summit with Bank of England governor



Bush tells Congress it 'must act' to avert disaster

Gordon Brown will guarantee savings up to £50,000 when parliament reconvenes next week

Gordon Brown has confirmed that the government plans to raise the guarantee for bank savings to £50,000 from £35,000 in a new banking law.

Brown confirmed the increase would be included in banking reforms to be put to parliament soon.

Speaking to reporters he said: 'We're raising it to £50,000.'

Protection of bank deposits has become a key public concern after the government was forced to nationalise two mortgage lenders this year, Northern Rock and Bradford & Bingley.

In a consultation document released in July, the Treasury proposed increasing the compensation limit to £50,000, on a per person per bank basis.

Brown repeated his pledge to do 'whatever is necessary' to get Britain through the global financial turmoil after Chancellor Alistair Darling held emergency talks with opposition parties.

'It's in the banking bill and it will go through very quickly and I hope it will go through with all-party support,' he said.

And he again insisted that the UK was in a 'far stronger position financially than in previous decades' and well placed to get through the present difficulties.

His 'vote of confidence' in the economy came as The FTSE-100 fell by £24billion during early trading, before rallying throughout the day with news that the U.S. President is still pushing for an American bail-out.

By the close of trading, it had risen 1.7 per cent - or 83.7 points - finishing at 4902.4.

Gordon Brown offered reassurance on the economy and is will guarantee savings up to £50,000

The banking bill is expected to be introduced when parliament resumes next week, and will strengthen supervision and give regulators powers to step in when a bank is failing to seize its assets and save customers' deposits.

Banks had been worried that they might have to pay billions of pounds into the deposit protection scheme when balance sheets are under strain because of the credit crunch, but the government has assured banks they will not have to pay money upfront.

It was a wildly different picture from the hefty falls predicted today, and clawed back some of yesterday's 5 per cent slump.

But, in the face of demands from Liberal Democrat leader Nick Clegg for a 'cast iron guarantee' that no depositors would lose out, the Prime Minister said he believed Government plans to extend the present protection level to £50,000 would be sufficient.

In one of a round of media interviews, Mr Brown said: 'We will do whatever is necessary, however it is necessary, to ensure the stability of the system, which is vital to the security of family budgets and the security of pensioners with savings.'

Brown told reporters the irresponsibility in the financial markets 'has to be dealt with' but denied failing to prevent it happen when he was Chancellor.

'These are essentially problems that were created by the explosion of financial markets in the States - they affect every other country.

'Where there is irresponsibility - and to be honest, the risk-taking that is irresponsible has been concealed - we have to take action.

'The regulators did not know what was actually happening.'

Asked whether he would follow the Irish Government in giving a full guarantee for savers, he said: 'Let's remember that the Irish are dealing with taxpayers' money here. We have got to get what is right and also what is reasonable.

'Of course we look at every intervention that is necessary to take but I think people can see from our actions so far that depositors have been protected - no UK depositor has actually lost money.'

Ireland guaranteed all bank deposits on Tuesday in a bid to improve the industry's access to international funds frozen by the global credit crunch.

The pledge, which covers up to 400 billion euros of liabilities - more than twice the country's annual gross domestic product - and includes retail, commercial and interbank deposits, takes effect immediately and expires in September 2010.



Rollercoaster: A video screen shows losses on the FTSE-100 this morning as people walked to work. Shares dropped 140 points before rallying

Crisis talks: Bank of England governor Mervyn King leaving Downing Street today after an emergency breakfast meeting with Gordon Brown

Earlier today Bank of England Governor Mervyn King arrived for a breakfast discussion with the PM and Chancellor Alistair Darling ahead of the regular Cabinet meeting at Downing Street.

The meeting came as the Stock Exchange was rocked by the fallout of the rejection in the U.S. of George Bush's £400billion ($700billion) banks bail-out.

However U.S. stocks clawed back from Wall Street's devastating slide as investors bet Washington would resuscitate a plan to stabilize the U.S. financial sector despite Monday's defeat.

The benchmark S&P 500 rose more than 4 percent to recover nearly half of the prior day's losses after U.S. President George W. Bush pledged to continue talks on a $700 billion rescue plan.

On the failed bail-out, Mr Brown told Sky News: 'What has happened is clearly disappointing and clearly a matter of regret because it has created so much uncertainty, not just through America but around the world.

'I'm confident that reason will prevail, reason must prevail and I think reason will prevail.

'When people have seen in Congress and in Senate the effect of what happened yesterday, I believe that reason in time, perhaps on Thursday, will prevail.'

He added: 'I believe the Americans have come to realise that they have a responsibility to the rest of the world as well as themselves and in Britain we will do whatever is necessary, however it is necessary.'

On UK efforts to shore up the banking sector, the Prime Minister said: 'We are dealing with the problems one by one that have emerged as a result of the fall-out from America.'

He added: 'This is the time to roll up our sleeves and sort out the system.'

Mr Brown and Mr Darling spent an hour briefing the Cabinet on the crisis and possible measures to stabilise the markets.

Conservative leader David Cameron requested talks with the Prime Minister last night and they spoke at around midnight, with Mr Cameron promising his support for any emergency measures.

Mr Brown also called Liberal Democrat leader Nick Clegg, who promised to co-operate with the Government.

Mr Clegg today called for a 'cast-iron guarantee' that savers would be protected.

He said: 'British people need total reassurance that their savings are safe.'



A Downing Street spokesman said: 'We obviously welcome constructive support.'

David Cameron offered the Tory's support for a cross-party deal to tackle the financial crash

President Bush this afternoon repeated that the entire American economy depended on a bail-out being agreed and told politicians they had to do their duty to save the country from disaster.



'For the financial security of every American, Congress must act,' he said at the White House as both parties were in fresh talks in a bid to reach a new agreement.

Moments later, the Dow Jones opened for business with little sign of yesterday's chaos. Within less than an hour, it was up more than 250 points.



In the UK, despite gains on the FTSE-100 overall, banks shares were still being pounded. Shares in Halifax Bank of Scotland tumbled almost 15 per cent at one point amid rumours Lloyds TSB was repricing the terms of its takeover deal.



Lloyds, whose value was up five per cent, has offered 0.833 of its own shares - currently equivalent to 187p - for every HBOS share in a deal valuing the lender at £9.8 billion but HBOS was trading 33 per cent lower at around 125p today.



An HBOS spokesman shrugged off the concerns, insisting it was 'full team ahead'.

'Share price volatility in bank stocks is part of the menu at the moment. These are not normal times,' he said.

U.S. President George W. Bush speaks about the economic rescue plan at the White House on Tuesday

Royal Bank of Scotland shares also dropped eight per cent before climbing back to be four per cent down amid fears about its exposure to the bad debt crisis.

The timing of the Downing Street summit this morning, just before the weekly Cabinet meeting, raised the prospect a stability package could be announced.

Downing Street insisted it was 'routine'. A source said: 'It is natural that the Prime Minister, the Chancellor and the Bank governor should meet in such circumstances.'

Meanwhile, David Cameron insisted the bitter political infighting in the U.S. over its economic rescue must not be repeated in Britain.

In a surprise speech on the financial crisis to the Tory conference in Birmingham, he promised to work with Government on any necessary action to increase stability.

'Today it is the time for us to send a clear message to our political opponents and to our country that we will not allow the political wrangling that took place in America to happen here in our own country,' he said.

'In Britain, we are all in this together so in Britain let us stick together and together we will find a way through.'

Chief Whip Geoff Hoon, in an interview with tomorrow's New Statesman, calls the crisis worse than Black Wednesday in 1992.

He says it is 'actually far more significant than John Major's government being forced out of the ERM'.

Chaos: Wall Street traders found themselves looking at ruin as the Dow Jones Index went from into freefall in the worst day of trading in history

The Treasury were also locked in discussions about the crisis today with the Financial Services Authority as shares fell across the globe in the wake of the vote in America.

And Chancellor Alistair Darling met with his Tory and Liberal Democrat counterparts later to ensure they were working together.

John McFall, chairman of the Commons Treasury Select Committee, said U.S. politicians had 'turned off the life support system for the economy'.

The interbank lending rate - known as the LIBOR and normally close to the base rate, which is currently five per cent - soared as financial institutions hoarded cash.

In sterling markets it rocketed overnight by 1.5 per cent to 6.78, while the dollar lending rate trebled in just one day to hit 6.88 per cent.

Across the globe, shares tumbled: Germany's DAX was down more than 60 points or 1.15 per cent while the Cac-40 in France dropped 26 points or 0.68 per cent.

In Asia, Japan's Nikkei closed down 4.1 per cent and the Hang Seng in Hong Kong plunged as much as six per cent before recovering to close up 0.76 per cent.

Australian shares also tumbled 5.3 per cent before closing 2.4 per cent down as stocks in New Zealand, India, Singapore, the Philippines and South Korea dipped.

Belgium, France and Luxembourg were forced to inject almost 6.4billion euros into the bank Dexia, making it the second Belgian bank this week to be bailed out.

Trading on Russia's two main stock markets was suspended and in Ireland, the government announced it would guarantee all bank deposits for the next two years in a bid to instil some confidence.

The FTSE in London had risen back to be around 80 points in afternoon trading amid hopes of a fresh vote on the U.S. bail-out in Congress later this week.

Richard Hunter, head of equities at Hargreaves Lansdown stockbrokers, said: 'This deal is not dead in the water and there are hopes that when Congress reconvenes it could still go through.'

There was also the promise of a rebound on Wall Street when the market opens this afternoon after Dow futures indicated shares could recover.

President Bush is due to address members of Congress again today in a fresh appeal to get his Bill passed.

Failed: The bail-out bid was rejected by the House of Representatives, sparking panic on Wall Street where share prices fell dramatically

Republicans from his own party sparked the meltdown yesterday by killing it off in the House of Representatives.



Opposition centred on the concern that hard-working taxpayers would be left carrying the bill for the failures at U.S. banks, rather than the finance giants themselves.

Wall Street's Dow Jones index plummeted as U.S. analysts reacted with horror when it was rejected by 226 to 207 votes.



The fall of 777 points was the biggest in one day ever on the New York stock exchange - though not as great in percentage terms as the fall in share prices in the Great Crash of 1929 or Black Monday in October 1987.

Banking experts warned of a 'failure of the financial system' unless senior officials in the U.S. administration can hammer out a compromise deal in the next few days.

Stephen Berte, of Standard Life in Boston, said: 'I can't believe they weren't able to come together and come up with a solution. Complete disaster was predicted if it didn't pass... and it didn't pass.'

U.S. Treasury Secretary Henry Paulson, who masterminded the original rescue strategy, said: 'We need to put something back together that works.'

He promised to 'use all the tools available to protect our financial system,' but warned he warned that 'our toolkit is substantial but insufficient'.