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Bank of England Makes Radical Lending Move

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Gordon Brown The Bank of England today announced a radical new plan to help ease the credit crunch by loaning Banks £50 billion.

It announced it would allow banks to trade mortgage-backed bonds, whose deal has become problematic, for specially-issued Treasury bills. This would result in the freeing up of banks’ balance sheets, making it possible for them to lend mortgages to more to households challenged by rapidly diminishing mortgage options and property values.

The swaps are available only for assets existing at the end of 2007, and new loaning cannot be faciliatated by them.

Banks have applauded the Bank of England’s “innovative and unequaled policy response”, and are surefooted that the move will enable them to lend mortgages to more to consumers and home buyers.

Chancellor Alistair Darling has declared that this move is necessary to keep more damage to the United Kingdom economy occuring as a result of the credit crisis, and will provide more details of the plan to MPs in the House of Commons subsequently this week.

BoE Governor, Meryn King, was quoted by Reuters as saying: “The Bank of England’s scheme will lift confidence in financial markets while ensuring that the stake of losses on the loans they have made remains with the banks.”

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