UK announces £50 billion bailout plan
The UK government held emergency meetings yesterday after shares in the country's major banks took a nosedive. This morning chancellor Alistair Darling, who heads UK finances, has detailed a plan for a £50 billion bailout fund to rescue British banks should they fail.
Importantly, this bailout plan is entirely different from the $700 billion bailout plan just passed in the US. Under the US plan, the taxpayers will be buying the bad debt off of US financial institutions. Under the UK plan, the taxpayers will be buying the banks themselves. The government will become a partial owner of these large banks, most of which are the consumer banks which British citizens use to store their money.
Chancellor Alistair Darling today launched a drastic rescue of Britain's high street banks in move designed to head off a cataclysmic failure of confidence by announcing a part-nationalisation plan with £50 billion of taxpayers' money.
He said there will also be extra help from the Bank of England to ensure that the banks have enough cash to run their day-to-day activities to help reassure savers and kickstart the paralysed credit markets.
The Bank of England will make available at least £200 billion to banks under the Special Liquidity Scheme.
Seven banks and Britain's biggest building society have signed up for up to £50 billion of additional finance from the government in exhcnage for the taxpayer taking preference shares, ordinary shares or permanent interest bearing shares (PIBS).