Indices Fall as US Announces $200bn Lawsuit Against Banking Sector
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Indices Fall as US Announces $200bn Lawsuit Against Banking Sector

Indices Fall as US Announces $200bn Lawsuit Against Banking Sector


Even though it’s a bank holiday in the US things are frantic in the indices spread betting markets as always.

The US decided to drop a bombshell on the banking sector ahead of their extended weekend by announcing a $200 billion lawsuit across the whole industry for the miss-selling of mortgage backed assets, the dreaded sub prime loans.

When the sector is still just about in recovery mode these lawsuits have sent shockwaves through US shares and the overall financial markets, sending Europe into a tailspin this morning.

Bank bashing is back and with a vengeance. It will go on throughout this week and next as the Vickers report on the UK banking system is released next Monday.

There are several factors that could be the cause of the next major recession, could it be the European sovereign debt crisis, or maybe rapidly rising inflation or possibly even a slowdown in Chinese growth.

However, you can bet your bottom Dollar that a lawsuit of this magnitude will decimate the banking sector and, as much as the public seems to hate them, we desperately need them to help fuel growth.

The same goes for the Vickers report which as we all know is going to recommend the retail and investment banking divisions of UK banks are separated.

In theory it all sounds like a nice idea, but the timing is bad particularly. Banks have been forced to increase the amount of capital they hold, whilst being continually badgered to increase the amount of lending they do and at the same time they are coping with a raft of new regulations.

One of the nice things about the summer period is that politicians are on holiday too. Unfortunately, everyone has to return to work and, with the release of this report next Monday, the political bickering will be intense.

The opposition will be calling for the recommendations to be imposed but the governing coalition will have to U-turn once again.

The bottom line is that the UK does not want to make its banking sector any less competitive at this time of economic fragility.

All of this has led to weaker stock markets with the FTSE 100 index opening below the 5200 level.

Investors are struggling to maintain a bullish stance on the financial spread betting markets at the moment as the markets seem to keep on being hit by bad news.

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'Indices Fall as US Announces $200bn Lawsuit Against Banking Sector' by DB, updated 05-Sep-11

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