A Rare Piece of Financial History
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https://www.thetimes03jan2009.com/
Chancellor on brink of second bailout for banks
Billions may be needed as lending squeeze tightens
Francis Elliott Deputy Political Editor Gary Duncan Economics Editor
on state-backed gurantees to encour age private finance, but a number of in- terventions are on the table, including further injections of taxpayers' cash.
Under one option, a "bad bank" would be created to dispose of bad
Alistair Darling has been forced to consider a second bailout for banks as the lending drought worsens.
The Chancellor will decide within weeks whether to pump billions more into the economy as evidence mounts that the £37billion part-nationalisation last year has failed to keep credit flowing. Options include cash injections, offiering banks cheaper state guarantees to raise money privately or buying up "toxic assets", The Times has learnt.
The Bank of England revealed yester-
day that, despite intense pressure, the banks curbed lending in the final quar- ter of last year and plan even tighter restrictions in the coming months. Its findings will alarm the Treasury.
The Bank is expected to take yet more aggressive action this week by cutting the base rate from its current level of 2 per cent. Doing so would reduce the cost of borrowing but have little effect on the availability of loans.
Whitehall sources said that ministers planned to keep the banks on the boil" but accepted that they need more help to restore lending levels. Formally, the Treasury plans to focus
debts. The Treasury would take bad loans off the hands of troubled banks, perhaps swapping them for government bonds. The toxic assets. blamed for poisoning the financial system, would be parked in a state vehicle or "bad bank" that would manage them and attempt to dispose of them while "detoxifying the mainstream banking system.
The idea would mirror the initial proposal by Henry Paulson, the US Treasury Secretary, to underpin the American banking system by buying Continued on page 6, col 1 Leading article, page 2
Pub chain cuts the price of a pint from £1.69 to 1989 levels Business, page 47