Taxpayer to invest £50bn in High Street banks
by Gill Montia
Story link: Taxpayer to invest £50bn in High Street banks
The Government has unveiled plans to rescue the UK’s ailing High Street banks by investing up to £50 billion in banks that need injections of cash.
Banks partaking in the scheme will be part-nationalised, providing the taxpayer with an opportunity to benefit from future profit.
Prime Minister Gordon Brown has explained the move by saying that the financial crisis is not a time for conventional thinking but for “fresh and innovative intervention that gets to the heart of the problem”.
He is promoting the bail-out as providing “the building blocks to allow banks to return to their basic function of providing cash and investment for families and businesses”.
UK banking shares plummeted yesterday, with Royal Bank of Scotland stock losing almost 40% of its value.
The Prime Minister, Chancellor of the Exchequer, Governor of the Bank of England and Chairman of the Financial Services Authority are reported to have worked into the early hours of this morning to finalise a plan that could prevent another disastrous slide in share prices today.
It is understood that the rescue package will demand the resignations of the chief executive and the chairman of Royal Bank of Scotland, Sir Fred Goodwin and Sir Tom McKillop.
The cost of the recapitalisation element of the plan is £50 billion, however the Bank of England will continue with its Special Liquidity Scheme, which allows lenders to swap untradeable mortgage backed assets for Treasury Bills, creating further exposure for the UK taxpayer.
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