Another Belgian bank rescued as financial crisis spreads

 Dexia became the second Belgian bank this week to get a government and shareholder bailout Tuesday when Belgium, France and Luxembourg said they would inject 6.4 billion euros ($9.6 billion Cdn) into it to keep it afloat.

Dexia's CEO Axel Miller — who immediately stepped down — said the bank had no real option to asking for state help because "our feeling was clearly that this week is going to be very tense on the market and we might be … one of the banks that might be put under pressure."

Dexia, a French-Belgian specialist in lending to local governments, ran up huge losses related to the U.S. subprime mortgage meltdown. Its shares closed almost 30 per cent lower Monday,  triggering emergency talks with government officials.

This came barely two days after Belgium, the Netherlands and Luxembourg moved to save Fortis bank on Sunday, pumping 11.2 billion euros into it after its shares shrank by a fifth Friday. Traders saw the bank as overleveraged.

Markets clearly welcomed the bailout, with Dexia's share price rallying nearly 8 percent in Paris trading and Fortis rising 9 percent in Amsterdam on Tuesday afternoon.

Dexia said the extra money would allow it remain "one of the better capitalized banks in Europe" even if market volatility further devalues securities, equities and other products it holds.

Dexia ran into trouble with its U.S. bond insurance unit FSA. The unit was hit hard by the subprime housing crisis, which saw loans made to people with poor credit drop sharply in value on worries that borrowers could not make costly repayments. Holders of bonds based on those mortgages suffered heavy losses.

Dexia was also hurt by the collapse of U.S. investment bank Lehman Brothers, saying it expects that to cause it 350 million euros in losses.