Hank Paulson’s a wimp. Alistair Darling, Britain’s Chancellor of the Exchequer, has shown him what a real bailout looks like, throwing £500 billion worth of support, including up to £50 billion of taxpayer-sourced equity, at the UK banking system.
The degree of desperation evidenced by the measures underscores the severity of the crisis afflicting the UK banks. The eight banks who have already signed up to participate in the rescue package include Britain’s biggest banks – Barclays, Royal Bank of Scotland, HSBC, HBOS and Lloyds TSB among them.
With its biggest banks needing to refinance more than £50 billion of maturing debt within the next six months, their share prices in freefall and access to liquidity drying up the government had little choice but to try to do something dramatic enough to restore some confidence – and some capacity for the banks to maintain lending – to its system and economy.
The package of measures is certainly comprehensive and falls within the “whatever it takes” approach to responding to a crisis.
The government will make £200 billion of short term liquidity available to the banks and says it will extend and widen its facilities in whatever way is necessary to ensure the stability of the system.