There is yet more from the FT about the crash: an article suggesting that while the US government had to nationalise the finance system to save it, no European government is big enough to do the same, if that proves needful:
<blockquote>a formal default by AIG would have exposed European banks to large increases in regulatory capital requirements, with possibly devastating effects on their ratings and market confidence. Thus, the US Treasury has saved, inter alia, the European banking system.</blockquote>
Now, we don’t know whether the US government has in fact saved the European banking system. The most we can say is “so far, so good”. But if it hasn’t. the authors have some jaw-dropping figures:
<blockquote>the largest European banks have become not only too big to fail, but also too big to be saved. For example, the total liabilities of Deutsche Bank (leverage ratio over 50!) amount to about €2,000bn (more than Fannie Mae) or more than 80 per cent of the gross domestic product of Germany. This is simply too much for the Bundesbank or even the German state, given that the German budget is bound by the rules of the European Union’s stability pact and the German government cannot order (unlike the US Treasury) its central bank to issue more currency. Similarly, the total liabilities of Barclays of around £1,300bn (leverage ratio 60!) are roughly equivalent to the GDP of the UK. Fortis bank has a leverage ratio of “only” 33, but its liabilities are three times the GDP of its home country of Belgium.</blockquote> The only body which can rescue such banks, they say, is the ECB: the European Central Bank. But that only works within the Eurozone. Britain and Switzerland both stand outside it. Obviously it’s no comfort to think that I don’t have any money in Barclays. If it were to go down, I wouldn’t have any money anywhere, and neither would you, gentle reader. All we would have left is the gratification of knowing how very very very very wrong the Right in Britain has been about economics for the last twenty years and under the circumstances I would rather that the Right had been right.