British bank action boosts stocks — Paulson on sidelines in U.S.

Britain’s FTSE 100 stock index was up nearly 5 percent; markets elsewhere in Europe were up even more, Asian markets closed the books on a strong Monday and the Dow is off to a good early start.

All courtesy of the British government announcing a £37 billion (about $80 billion) bank injection and Eurozone leaders completing work on a bank rescue.

Both British and Eurozone actions have three main elements — liquidity support, inter-bank lending guarantees and recapitalization of distressed banks.

Maybe Henry Paulson will get on board now.

And, interesting that even though this is above all a U.S.-caused problem, we couldn’t get the right fix, and the markets didn’t respond.

Today, Paul Krugman agrees;

(British Prime Minister Gordon) Brown and Alistair Darling, the chancellor of the Exchequer (equivalent to our Treasury secretary) defined the character of the worldwide rescue effort, with other wealthy nations playing catch-up.

the Brown government has shown itself willing to think clearly about the financial crisis, and act quickly on its conclusions. And this combination of clarity and decisiveness hasn’t been matched by any other Western government, least of all our own. ..

(A) sort of temporary part-nationalization, which is often referred to as an “equity injection,” is the crisis solution advocated by many economists — and sources told The Times that it was also the solution privately favored by Ben Bernanke, the Federal Reserve chairman.

But … Henry Paulson … rejected this obvious path, saying, “That’s what you do when you have failure.”

Your friends caused this in the first place, Henry!