£200bn to save banks from bad debt

Discussion in 'Economics' started by ASusilovic, Jan 17, 2009.

  1. In an attempt to restore confidence within the financial sector, the Treasury will tell the banks of its plan on Saturday. It aims to announce details of the rescue package publicly early next week.

    The bad bank plan has climbed the political agenda in the past couple of weeks as the Government has become aware of the extent of the lenders' bad debts.

    Sources said that a bad bank would have to take on about £200 billion of toxic assets. That would take the Government's total commitment to solving the banking crisis to almost £1 trillion in taxpayers' money that has either been spent or pledged.

    That equates to about £33,000 per taxpayer. The total sum is equivalent to more than two-thirds of Britain's annual GDP of £1.4 trillion.

    The £1 trillion figure includes the £500 billion announced in October to buy shares in the banks and to guarantee their debt. It also includes a further £100 billion fund, which will also be announced next week as part of the rescue package, to provide the banks with cash to lend to ordinary customers and businesses.

    As well as creating a bad bank, the Government is planning to use Northern Rock as a "good bank" which can dramatically increase lending to individuals and businesses.


    Finally, they will create a "good bank":D :D :D
  2. The "good bank" will be wherever Meredith Whitney is employed, not Abby Cohen. :cool: