New Bank Bail-out for Britain
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Gordon Brown and Alistair Darling have announced an investment of £100 billion of taxpayer’s money into the British banking system, but will it stimulate more lending?
This will bring the cost of attempting to rescue the country from the worst impact of the banking crisis to a total £147 billion in taxpayer’s money. Gordon Brown said that the initial investment of £37 billion in October and then a further £10 billion in November had been meant to stabilise the banks. The latest investment, it is hoped, will stimulate the banks into lending again.
Banks – benefiting from the availability of a cash stimulus and promised government-backed insurance against ‘bad debts’ – will in turn have to sign agreements to make credit available to the public and business sectors. In addition the government plans to hold banks to agreements to lend responsibly and to be open to scrutiny about where the money is spent.
“We will protect taxpayers’ interests, liabilities will be backed by assets and fees will be charged for the schemes that we are introducing. But the costs of doing nothing are simply too great. These are extraordinary times, they require unprecedented action,” said Gordon Brown. He also assured taxpayers that the massive government investment in the banks was not a long-term solution, but for as long as it takes for the banking system to be stable. The government shareholdings in these banks would then be sold, hopefully at a profit to the taxpayer.
Mr Brown took pains to point out that the banking crisis is not just a British but a global problem, and that it therefore could not be set to rights on a national level alone. He referred to the need for a global regulatory system to oversee the financial sector. The EC (European Commission) in Brussels warned that the European Union (27 nations) faces a shrinking economy and millions of job losses.
In the USA, advisor to President-elect Barack Obama, David Axelrod, said that it was necessary to ensure that funding available to banks in that country through the TARP (Troubled Asset Relief Program) should be monitored carefully to ensure “credit flowing again to businesses and families across the country. That hasn’t happened with the expenditure of the first $350 billion.”
Gordon Brown said of the scheme announced by himself and Alistair Darling: “These are comprehensive measures focused on one purpose – increasing the amount of lending that is available to families and to the businesses that are the backbone of our country and who want to invest and create jobs.”
