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As Contagion Spreads, Moods Abruptly Shift
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The German government, meanwhile, announced that it had orchestrated a bailout of the country's second-biggest commercial property lender, Hypo Real Estate Holding AG. The German Finance Ministry said it arranged an emergency credit line of $50 billion for the bank from several private lenders.
The rescue came four days after Finance Minister Peer Steinbrueck said the country's banking system was "extremely stable" and rejected suggestions that Germany consider a U.S.-style bailout plan for its ailing banks. "More than anything, the finance market is an American problem," Steinbrueck said in a speech Thursday to the German Parliament.
Problems at Hypo Real Estate, which lends primarily to local governments and property developers, had been known for months; the bank had posted big losses on its subprime loans in the United States. But Hypo's access to credit rapidly eroded and other problems with speculative investments emerged in recent days, forcing the German government to intervene, according to government and bank officials.
Analysts said that German banks remained on a stronger footing than those in the United States or Britain and that it was unlikely the government would need to fashion an industry-wide bailout.
In Iceland, the government said Monday it had taken control of Glitnir bank, the country's third-largest, paying about $878 million for a 75 percent stake.
Several analysts said the European banking problems are biggest at institutions with heavy exposure to European property bubbles. Millions of homeowners and developers took out loans against property that is no longer valued at what it was months ago.
Nicolas Véron, a research fellow at the Bruegel center in Brussels, said concern has risen about strains in the banking system spreading to the Baltic countries and Eastern Europe, where several nations also have experienced property bubbles.
"We knew this would happen, because the storm in the U.S. is so powerful," Véron said.
In Japan, veterans of the country's economic crash in the 1990s said Tuesday that it was not a complete surprise that U.S. lawmakers rejected the financial rescue plan. During that crisis, several Japanese banks and securities firms failed before the government gained popular support to inject capital into the financial system.
Hiromichi Shirakawa, chief economist at Credit Suisse in Tokyo, suggested that Americans' "sense of crisis has not yet reached the level where they will approve a big bailout. For this kind of bailout, it is quite important for something to happen that makes people feel really bad about their own finances."
Jordan reported from London. Correspondents Blaine Harden in Tokyo, Craig Whitlock in Berlin, Emily Wax in New Delhi and Joshua Partlow in Rio de Janeiro and staff writer Steven Mufson in Washington contributed to this report.
