A bad bank is not such a bad option.
Posted on February 16th 2009
President Obama’s $800billion rescue plan for the US economy will be signed off by the senate over the next few weeks and there is no doubt that the US President is in a hurry to get the money to work quickly in order to jolt the US economy back to life. The US was the epicentre for the current global downturn and it is highly likely that the US will lead the recovery. The stimulus plan is as bold as it is large and fortunately for all of us the new President is very capable of turning things around. $500bn dollars has been earmarked to buy up toxic mortgage assets from banks in order to stop the rot permeating through their entire balance sheets. As I have said before, I now believe that the UK has to follow suit and get straight to the end game. UK banks are not lending money, despite being given billions of pounds in taxpayer’s money because the unknown losses on toxic assets have them in a state of paralysis.
The government must act now to remove these assets before it is too late or the government must bypass the banks and start lending money directly to householders and businesses. We are now entering a vicious and devastating cycle where we are starting to see high profile businesses going bust and redunding their staff because their bankers are unwilling or unable to continue to support them.
A bad bank is not a bad option!
