Shock Defeat for Bailout In House of Representatives

House Votes Down $700bn Bailout
The US House of Representatives has voted by 228 to 205 down the $700bn bailout agreed over the weekend. Two-thirds of Republicans and 95 Democrats rejected the deal.

A massive drop in the Dow Jones ensued with a 778 point decline. After the close the percentage was 7.7%. The S&P 500 suffered its biggest percentage drop since Black Monday in 1987.

The FTSE dropped 270 points or 5.3%.

Other Market Moves
Three governments, the Dutch, Belgian and Luxembourg pumped €11bn into Fortis bank. Fortis for its part will have to sell its stake in the ABN Ambro bank.

French bank Dexis has become the latest target of speculators. Dexia handles a lot of the finance for local government. The French government made the now obligatory statement tha the bank would not be allowed to fail.

Wachovia, another bank under attack has been swallowed by Citigroup in a government backed deal..

The UK government is nationalising the Bradford and Bingley bank. Spanish banking giant Santander is to take the savings business and branch network.

Wachovia and Morgan Stanley?

The New York Times is suggesting a merger between US Investment bank Morgan Stanley and Wachovia.

Such a deal would leave Goldman Sachs as the sole remaining independent investment bank on Wall Street. Two other bulge bracket banks, Bear Stearns and Lehman Brothers have gone to the wall. A third, Merrill Lynch, has gone the route of joining their retail bank brethren Bank of America.

Wachovia CEO at Lehman Conference

Wachovia CEO Robert K. Steel will present on Tuesday, Sept. 9, at the Lehman Brothers Global Financial Services Conference. His presentation will be available via live audio webcast beginning at 8:15 a.m. Eastern time, Sept. 9, through Wachovia's Investor Relations Web site at http://www.wachovia.com/investor . A replay will be available by approximately noon Eastern time, Sept. 9, until 5:00 p.m. Eastern time on Dec. 5, 2008.

Wachovia Announces ARS Settlement

Wachovia Corporation announced today that it has reached an agreement in principle for a global settlement with the Missouri Secretary of State (as the lead State in the North American Securities Administrators Association task force investigating the marketing and sale of auction rate securities, or ARS), the Attorney General for the State of New York and the Securities and Exchange Commission regarding ARS. Wachovia is pleased that the settlement produces a liquidity solution for its clients who purchased ARS at Wachovia.

"We understand that unprecedented market conditions have created difficulties for our clients, particularly those holding auction rate securities," said Robert K. Steel, president and chief executive officer of Wachovia Corporation. "We are pleased to announce a comprehensive solution for the liquidity needs of clients who purchased auction rate securities at Wachovia and to resolve this matter with federal and state regulators."

Daniel J. Ludeman, president and chief executive officer of Wachovia Securities, LLC, said, "Since this issue arose in February when auctions first started to fail, we have played a leading role in encouraging ARS issuers to restore liquidity to all of our clients, including those who have become part of our firm through the Oct. 1, 2007, merger of A.G. Edwards and Wachovia Securities. The dollar value of ARS held by Wachovia Securities clients has been cut by more than 50 percent through redemptions and successful auctions. Today's agreement in principle underscores our desire to ensure that clients who purchased ARS at Wachovia receive the liquidity they need."