From Times Online
July 16, 2008

Fears over safety of savings triggers panic in America



IndyMac depositors queue up outside the Santa Monica branch in an attempt to withdraw their money

Tom Bawden in New York and Gary Duncan, Economics Editor
America’s banking crisis reached new levels of hysteria yesterday as police ordered angry customers of IndyMac, a Californian bank on the brink of collapse, to remain calm or face arrest.

Police waded in to quell unrest among anxious IndyMac depositors as they queued outside the bank’s San Fernando Valley branch in a desperate attempt to withdraw their money.

The scenes reflected the growing panic that Americans are feeling over the safety of their savings, as every day brings a further dose of dire news about the deepening housing slump and the worsening outlook for US financial industries.

After the US Treasury moved at the weekend to throw an emergency $15 billion (£7.5 billion) funding lifeline to Fannie Mae and Freddie Mac, the stricken giants that underpin a vast slice of American mortgage lending, fears that the US economic turmoil is entering a dangerous new phase also spilled over into London’s stock market, sending shares plunging again.

More than £30 billion was wiped off the value of Britain’s biggest companies as the FTSE 100 index of bluechip shares tumbled by another 128.5 points, or 2.4 per cent.

Yesterday’s close at 5,171.9 marked the lowest ebb for London’s stock market since October 2005, after leading shares earlier fell even further, touching lows not seen since the aftermath of the 7/7 terrorist attacks on the capital.

The steep losses came as investors took flight from shares amid anxieties that severe fallout from US financial upheavals will hit British banks and financial companies. Investors have now seen the FTSE plummet by more than a fifth over the past 12 months — and about £375 billion erased from the value of Britain’s bluechip shares over that period.

As economic jitters gripped America, Ben Bernanke, the chairman of the powerful US central bank, the Federal Reserve, emphasised that the United States is beset by threats to its prosperity.

Mr Bernanke told the US Congress that the danger of still higher inflation in America was growing even as the peril over a severe downturn mounted. “The possibility of higher energy prices, tighter credit conditions, and a still-deeper contraction in housing markets, all represent significant downside risks to the outlook for growth,â€