Barclays has launched a $400m-plus legal action against Bear Stearns, accusing its Wall Street rival of fraud over the collapse of two hedge funds earlier this year, The Independent reports.
The collapse of the funds in June was the first sign of the seriousness of the mortgage market crisis, but Barclays alleges that Bear Stearns was misrepresenting the health of its hedge fund business for more than nine months leading up to the disaster.
Barclays' possible losses on the funds, to which it advanced a string of multimillion-dollar loans, could amount to between $300m and $400m, and the company demanded compensation and damages in a lawsuit filed with a New York court last night.
MORGAN STANLEY YESTERDAY became the latest bank to announce a bailout from a foreign government as the Wall Street firm reported the first quarterly loss in its 73-year history after taking writedowns of $9.4bn (£4.7bn) on mortgage-related investments, according to The Times.
The writedowns, which took Morgan Stanley to a $3.56bn fourth-quarter loss, were so severe that the bank was forced to agree a $5bn cash injection from the Chinese Government to prop up its capital base.
The Beijing Government's China Investment Corporation (CIC) will inject $5bn into Morgan Stanley in return for a 9.9% stake. This makes it the bank's second-biggest shareholder after State Street, the Boston asset manager. CIC will not get a seat on Morgan Stanley's board nor direct influence over its management. It will receive 9% interest instead of a dividend.
THE POUND FELL below $2 for the first time in three months in New York last night as financial markets anticipated swift and hefty cuts in British interest rates next year to cope with the deteriorating state of the economy, The Guardian reports.
Signs of weak consumer spending at the start of the Christmas shopping period and comments from the Bank of England that a "substantial loosening" in policy might be needed to counteract the credit crunch led to a sharp sell-off in sterling on the foreign exchange markets.
The Bank reflected its growing concern over the prospects for growth when it revealed that all nine members of its monetary policy committee voted for the quarter-point reduction in interest rates this month. It was the first unanimous decision to lower borrowing costs since the immediate aftermath of the 9/11 attacks in the United States more than six years ago, and came a month after the MPC voted 7-2 to keep rates on hold.
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