New shock therapy for the City
Updated on 18 January 2009
In a second immense bailout package the government puts hundreds of billions at stake to get the banks lending money again. John Sparks reports.
The treasury is giving the economy its best shot with massive interventions against bad debts, the mortgage market and even a U-turn on how to run Northern Rock.
The prime minister has revealed the government will offer another huge package of measures.
The key move will be an offer to insure the banks against their bad debts, saying the taxpayer will absorb hundreds of billions of banking losses.
There will be new help for other lenders like car finance companies, and Northern Rock will stop trying to get rid of its mortgage customers.
It amounts to the nationalisation of lending, with the government and taxpayer entering a market the banks have vacated.
The package includes a £200 billion insurance scheme for banks' bad debts and £100 billion to swap mortgage assets for Treasury bills.
