Government launches new banking bailout

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Government launches new banking bailout

Mon 19th Jan 2009

The government has announced a new bailout scheme for UK banks and mortgage lenders in an attempt to restart the flow of credit.

Prime minister Gordon Brown and chancellor Alistair Darling believe that the new plan, which will offer a further £100 billion of tax-payers money to underwrite mortgage-lending, will make it easier for people in the UK to get mortgages.

As part of the scheme the state-owned bank Northern Rock will be given a mandate to increase mortgage-lending and the Bank of England will be authorised to spend up to £50 billion buying up so-called toxic assets from banks.

While detractors accused the government of writing a blank cheque to banks, Mr Darling said: "If the banks use the measures we are offering today then they will have to enter into legally binding measures to increase lending."

Last year the government offered a £37 billion bail-out plan to banks, which was used to buy up bad assets.

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