Stocks rally as US rescue pledge continues fnancial rollercoaster
Updated on 19 September 2008
Inside the morning news meeting...
"The roller coaster that is the financial system has gone back up today," announces the programme editor without much preamble.
"Today Wall Street has rallied, the Asian markets have rallied and this morning so has the FTSE."
"If the FTSE could be rallied this morning, then what's to say it won't be spooked later today? People will take their money out won't they?" Someone asks.
So what's going on? The US has pledged a financial rescue plan to rid US banks of their bad debts, and markets have been buoyed by the news.
"We don't have the exact details yet about what the US government is planning, but it's thought an agency will be employed to neutralise the toxic debt that lies at the heart of the problem."
"Potentially over a trillion dollars will be ploughed in."
"This amount of money must do extraordinary things to the US economy," one of the eds comments.
"That's the cost of the war," one of the presenters says. But no-one is drawn - this morning it's all about the markets.
"How much is all this going to cost each individual tax payer in America?" someone asks.
Our economics unit steps in: "Economists on Capitol Hill are very uneasy about this. They are not rushing to grant bail. And there'll be some degree of horse trading.
"Mortgage debt has become completely illiquid: it can't be sold on. They're not necessarily valueless securities, as some believe, it's just that there's no scope to move them along at the moment.
"The question now is if banks will decide after recent scares that dealing in them again is a no go, or whether, in time, they will get back into it.
'If the Fed cuts rates the risk is passed to the largest financial organisation in the world: the tax base of the United States.'
"The problem is that, even with the injection of this huge amount of money, the issue is not eliminated, it's just moved around.
"Problem areas are just subsumed within bigger companies. The problems don't just go away, the government is just hoping the stronger companies can weather the storm."
"Can it turn around, though?" someone asks.
"What will solve the problem will be a turn around in the housing market. So the discussion now is the Fed cutting interest rates to make the idea more appealing.
"That way the risk is passed to the largest financial organisation in the world: the tax base of the United States."
It's quite a lot to get one's not-so-economics-minded head around. And one of the editors is concerned we don't alienate viewers by failing to explain the basics before jumping into the complexities.
"We don't want to overwhelm the viewer. The other night we had about three headlines all jostling for attention. We need to make sure we pick these apart and be really clear in our signposting: explain, explain, explain.
"We need to be clear about what is happening in the US and what is happening in the UK."
"The question is should the UK government follow suit to deal with its own financial problems? Mervyn [King, the governor of the Bank of England] looks like he's being dictated to by the banks."
"But they have learnt from Northern Rock a bit."
Housing is clearly as big an issue here as it is in the US. But will companies like HBOS withdraw their mortgages given recent strife? HBOS says it will. But will the government put pressure on them to do otherwise? And what will other companies, perhaps fearful of their future, do?
One of the business reporters has been in a press conference with some of the biggest companies suffering from the credit crunch: "The companies say all the government is really interested in at the moment is whether the lenders are going to keep up the amount of mortgage lending."
The concerned editor pipes up again: "We need to explain what this means - the issue is one of liquidity: not being able to borrow money is the problem.
"Pumping money into the markets brings to mind a huge hypodermic syringe. What exactly is that money doing? We need an explanation of what it does, why it helps, and why it isn't a long term solution."
With Sarah Smith, our Washington correspondent, doing overnight interviews in New York, and our economists untangling the issues in London, see how the story unfolds today - fully explained - on tonight's show at 7pm.
