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Darling unveils second bank bail-out
19.01.09
CHANCELLOR Alistair Darling today staked hundreds of billions of pounds of taxpayers' money on a second bank bail-out in a bid to free up "blocked" credit markets and head off a worsening recession.
Among a series of measures, Mr Darling set out plans for a new insurance scheme to protect banks from so-called toxic assets, a move it is hoped will encourage institutions to restart lending to businesses and households.
It is the second bail-out for the banks in the space of just three months.
The Treasury had been looking at the proposals for some weeks after it became clear that the initial £37 billion bail-out in October had failed to provide a sufficient platform for normal lending to resume.
However they were given added urgency by Friday's dramatic stock market falls amid fears that the banks were set to reveal further massive write-downs.
In a statement, the Government said: "The likely impact of today's announcements on the public finances will be mostly temporary, as investments will be held for no longer than is necessary to ensure stability and protect taxpayer interests; liabilities will be backed by assets; and fees will be charged for relevant schemes."
It said the new measures were necessary because of the continued deterioration in the global financial and economic situation over the past two months.
"The Government is clear that meeting lending demand to otherwise creditworthy businesses, homeowners and consumers is essential for supporting economic recovery," it added.
The new multi-faceted plans include a scheme in which the Government will, for a fee, underwrite the so-called "toxic assets" held by the banks in an effort to restore shaken confidence in the sector while releasing more funds for lending.
It said the scheme is designed to protect financial institutions against "exposure to exceptional future credit losses".
Banks would still be liable for an initial loss of around 10%, but it is hoped the move will boost confidence in the sector.
Mr Darling will also attempt to get home loans going again with a Government guarantee scheme for the mortgage-backed securities which were a major source of funding for the mortgage market before they dried up with the credit crunch.
This new guarantee scheme will provide full or partial guarantees to packages of asset-backed securities, including mortgages and corporate and consumer debt.
"Mortgage-backed securities supported a third of mortgage lending and the revival of this market is an important element of increasing the capacity of lenders to provide mortgages as demand increases in future," the statement said.
Details of the scheme, which is set to begin in April, are to be announced at a later date.
Reader views (7)
Uncontrolled credit is a most destructive force. Cameron would be wise to call for thriftiness, and the vast public funds now on offer to bankers being converted into hard work, energy, and ingenuity in the form of civil projects such as the prevention of coastal erosion, flood prevention, bolstering the Armed Services and Police, coal mining, forestry, our canal system and housing. This would help the many poor households and unemployed hands Labour have created as well as boost the economy. All Brown has to rely on is his Bumper Book Of Buzz Words.
- Robert El-Cid,, Hull, East Yorks.,
The government are not bailing out the banks, they are bailing out British business, who through there huge dependance on credit/debit (not unlike many households) have got thermselves into a mess. You only have to see how many household names have gone to the wall in the last few weeks to realise this. The economic downturn has been caused by astromonical energy prices and a reliance on debt. Yes, some banks have not been respponsible in the lending department. But it's a little like blaming MacDonalds for obesity, at the end of the day the responsibility is with the individual.
- Sandy, London
If the Governemnt give us the money instead of the banks (prob work out to a good few thousand each!!!) , we'll spend it and push the economy in the right direction (instead of giving it to the incompetent ungrateful leeches)...
- Dc, London
Where are the responsible bankers? Why are they not in court? Why are they still taking huge wages and bonus's. Why do they still have several houses and cars? No, this is not envy its called responsibility, it is dealing with people who have put generations of British in debt for many years.
- Roger, Surrey
Nationalize them all,remember you have NO CONTROL over that which you do not own.
- Marcus, Epsom Surrey
Yup I know, the first bailout worked so well we'll do it again. After all it wasn't like the banks just soaked up the billions handed to them from the public they so catastrophically failed.
Brown might be tight with his own money, but apparently not when it is ours.
- Frank, Home Counties, England
IDIOT!!! So, the banks are going down because of exposure to poor credit and they won't lend even after being bailed out before. So where's the logic of giving out yet more tax payers money - which we will have to pay back - to bail out a system that won't help us!!!!! This government is going to sink this country...
- Chris, London
