The American government has hinted it may consider partial-nationalisation of its tottering banks, amid growing warnings of an imminent global recession. The Treasury Secretary even admitted some US banks may fail, despite President Bush’s multi-billion euro bail-out.
Henry Paulson held out little hope of a catch-all solution: “One thing we must recognise – even with the new Treasury authorities – some financial institutions will fail. The EESA (Emergency Economic Stability Act) does not exist to save every financial institution for its own sake.”
The uncertainty is threatening one of the world’s most famous investment banks, Morgan Stanley. Its shares slumped this week on rumours that Japanese investment worth around seven billion euros may not happen. Mitsubishi UFJ insisted all was well and that the deal will go through next week, but the doubts remain.