Summary
THE Chancellors warning today that banks may not pass on rate cuts to homeowners for some time may take the shine off the Bank of Englands scheme to shore up the financial markets. Alistair Darlings comments underline the fact that the official response to the credit crunch has so far been aimed at the bank-ing system rather than ordinary borrowers. The Bank of England anticipates injecting at least [pounds]50 billion into the system: banks will exchange their debts based on mortgages for government-backed securities. The move will certainly increase the amount of liquidity in the financial system. Yet the swap of potentially dodgy securities based on mort- gages for gilt-edged government bonds looks less attractive from the taxpayers point of view.
Mervyn King, the Banks governor, is anxious to put paid to the idea that the banks are escaping from the consequences of their previous imprudent lending policies. So the banks will not only have to pay a fee for the swap; they will have to provide the Bank with assets of greater value than the government bonds they receive. Given the downward spiral of the housing market right now, this is the very least tax-payers have the right to expect.See the full content of this document
Extract
Darling and the Feel-Bad Factor ; Comment
We shall see whether this move does, as ...
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