Changes

Heavy borrowing by European banks meant the crisis immediately affected Britain and other countries as well, as the British housing bubble burst about the same time as the U.S. The British government had to take over major mortgage lenders, including Northern Rock in February, 2008.  Northern Rock's loans (£25 billion) and guarantees (£30 billion) extended by the Bank of England, together with the value of the company's mortgages (£55 billion), or £100 billion in all, were added to the British national debt.  Bradford & Bingley, half the size of Northern Rock, held £40 billion in toxic mortgages, and was nationalized in late September.  

Heavy borrowing by European banks meant the crisis immediately affected Britain and other countries as well, as the British housing bubble burst about the same time as the U.S. The British government had to take over major mortgage lenders, including Northern Rock in February, 2008.  Northern Rock's loans (£25 billion) and guarantees (£30 billion) extended by the Bank of England, together with the value of the company's mortgages (£55 billion), or £100 billion in all, were added to the British national debt.  Bradford & Bingley, half the size of Northern Rock, held £40 billion in toxic mortgages, and was nationalized in late September.  

====Fortis====

====Fortis====

In late September, the Fortis bank, the world's 20th largest business, was partially nationalized by three governments who injected $16 billion in emergency funds. In 2007 Fortis borrowed heavily for its $100 billion takeover of rival bank ABN Amro; the deal came at the market's peak, and Fortis now cannot pay its debts. The [[Belgium|Belgian]], [[Netherlands|Dutch]] and [[Luxembourg]] governments tried to inject capital but as consumer confidence plunged, Netherlands nationalized the Dutch wing of the company and the rest was sold in early October to the French bank BNP Paribas for €14.5 billion euros ($19 billion).  

In late September, the Fortis bank, the world's 20th largest business, was partially nationalized by three governments who injected $16 billion in emergency funds. In 2007 Fortis borrowed heavily for its $100 billion takeover of rival bank ABN Amro; the deal came at the market's peak, and Fortis now cannot pay its debts. The [[Belgium|Belgian]], [[Netherlands|Dutch]] and [[Luxembourg]] governments tried to inject capital but as consumer confidence plunged, Netherlands nationalized the Dutch wing of the company and the rest was sold in early October to the French bank BNP Paribas for €14.5 billion ($19 billion).  

====Germany====

====Germany====

In [[Germany]] Hypo Real Estate was given €50 billion euros ($68 billion) bailout by the government.  The government of [[Iceland]] took over its large banks, as the entire island economy verged on bankruptcy because it depended so much on large foreign loans. Most of the European countries hurriedly announced guarantees of personal bank deposits to avert further drop in consumer confidence and runs on the banks.  Stock markets around the world continue to decline as pessimism worsens.

In [[Germany]] Hypo Real Estate was given €50 billion ($68 billion) bailout by the government.  The government of [[Iceland]] took over its large banks, as the entire island economy verged on bankruptcy because it depended so much on large foreign loans. Most of the European countries hurriedly announced guarantees of personal bank deposits to avert further drop in consumer confidence and runs on the banks.  Stock markets around the world continue to decline as pessimism worsens.

====Central banks====

====Central banks====

The European Central Bank aggressively lent money to banks trying to ensure that banks would have adequate cash. The moves have not reassured savers or investors, and European stock markets have fallen even further than the American stock markets, as have the stock markets in China and Russia.   

The European Central Bank aggressively lent money to banks trying to ensure that banks would have adequate cash. The moves have not reassured savers or investors, and European stock markets have fallen even further than the American stock markets, as have the stock markets in China and Russia.   

On October 13, France, Germany, Spain, the Netherlands and Austria committed €1.3 trillion euros ($1.8 trillion) to guarantee bank loans and take stakes in banks, in an emergency effort to head off the collapse of their financial systems.<ref>Carter Dougherty, Nelson Schwartz and Floyd Norris, "Financial Crises Spread in Europe," [https://www.nytimes.com/2008/10/06/business/06markets.html?_r=1&hp&oref=slogin ''New York Times,'' Oct 6, 2008]; Gregory Viscusi, [https://www.bloomberg.com/apps/news?pid=20601087&sid=azerJ573HcbI&refer=home "EU Nations Commit 1.3 Trillion Euros to Bank Bailouts," ''Bloomberg.com'' Oct. 13. 2008]</ref>

On October 13, France, Germany, Spain, the Netherlands and Austria committed €1.3 trillion ($1.8 trillion) to guarantee bank loans and take stakes in banks, in an emergency effort to head off the collapse of their financial systems.<ref>Carter Dougherty, Nelson Schwartz and Floyd Norris, "Financial Crises Spread in Europe," [https://www.nytimes.com/2008/10/06/business/06markets.html?_r=1&hp&oref=slogin ''New York Times,'' Oct 6, 2008]; Gregory Viscusi, [https://www.bloomberg.com/apps/news?pid=20601087&sid=azerJ573HcbI&refer=home "EU Nations Commit 1.3 Trillion Euros to Bank Bailouts," ''Bloomberg.com'' Oct. 13. 2008]</ref>

====Britain====

====Britain====

Britain on October 8 announced a gigantic £400 billion ($680 billion) rescue plan for its banks; the government would partially own them.  Prime Minister [[Gordon Brown]] said banks would still be run by their old managers, but that the government would have to be "satisfied" on matters of salaries, [[dividend]]s and lending activities.  The money involved is about a third of Britain's annual [[Gross Domestic Product|GDP]] (comparable to $5 trillion in the U.S. economy.)

Britain on October 8 announced a gigantic £400 billion ($680 billion) rescue plan for its banks; the government would partially own them.  Prime Minister [[Gordon Brown]] said banks would still be run by their old managers, but that the government would have to be "satisfied" on matters of salaries, [[dividend]]s and lending activities.  The money involved is about a third of Britain's annual [[Gross Domestic Product|GDP]] (comparable to $5 trillion in the U.S. economy.)

In addition to the Big Three hundreds of large suppliers of parts are in financial crisis as well; most would go under if the Big Three go bankrupt.

In addition to the Big Three hundreds of large suppliers of parts are in financial crisis as well; most would go under if the Big Three go bankrupt.

Intense debate in December 2008 focused on allowing bankruptcy or injecting billions more of federal aid; it would be in addition to a $25 billion loan Congress passed in September 2008 to assist in increasing fuel efficiency.  The Democrats in Congress supported president Bush's proposal to use the fuel-efficiency loans to help with the immediate problem. It passed the House but Senate Republicans broke with Bush and it failed.  The opponents called for a bankruptcy that would allow GM to get out of its contracts to pay union members high wages, as well as generous pensions and medical benefits to retired workers.  Bush then acted unilaterally and decided to make TARP loans to  GM and Chrysler, on December 19. GM and Chrysler will get $13.4 billions in loans they can use to pay their suppliers.<ref>GM and Chrysler will receive $4 billion each when they sign the loan agreements with the Treasury. GM will have access to an addition $5.4 billion on Jan. 16 and another $4 billion on Feb. 17 provided that Congress has released the remaining $350 billion for the Treasury’s TARP rescue program.</ref> GM can receive another $4 billion in February, but by then the Obama administration will be in charge, and it is emphasizing the need for a long-range solution.<ref>David E. Sanger, David M. Herszenhorn and Bill Vlasic, “Bush Aids Detroit, but Hard Choices Wait for Obama,” [https://www.nytimes.com/2008/12/20/business/20auto.html?hp ''New York Times'' Dec. 19, 2008]</ref>  

Intense debate in December 2008 focused on allowing bankruptcy or injecting billions more of federal aid; it would be in addition to a $25 billion loan Congress passed in September 2008 to assist in increasing fuel efficiency.  The Democrats in Congress supported president Bush's proposal to use the fuel-efficiency loans to help with the immediate problem. It passed the House but Senate Republicans broke with Bush and it failed.  The opponents called for a bankruptcy that would allow GM to get out of its contracts to pay union members high wages, as well as generous pensions and medical benefits to retired workers.  Bush then acted unilaterally and decided to make TARP loans to  GM and Chrysler, on December 19. GM and Chrysler will get $13.4 billion in loans they can use to pay their suppliers.<ref>GM and Chrysler will receive $4 billion each when they sign the loan agreements with the Treasury. GM will have access to an addition $5.4 billion on Jan. 16 and another $4 billion on Feb. 17 provided that Congress has released the remaining $350 billion for the Treasury’s TARP rescue program.</ref> GM can receive another $4 billion in February, but by then the Obama administration will be in charge, and it is emphasizing the need for a long-range solution.<ref>David E. Sanger, David M. Herszenhorn and Bill Vlasic, “Bush Aids Detroit, but Hard Choices Wait for Obama,” [https://www.nytimes.com/2008/12/20/business/20auto.html?hp ''New York Times'' Dec. 19, 2008]</ref>  

===Bankruptcy scenario===

===Bankruptcy scenario===