Taxpayer may be left with huge bill for bank bailout

[Legal Beagles]

The prospect of the largest state intervention in financial markets in British history prompted warnings yesterday that taxpayers could face a huge bill following the credit crunch.


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[Amethyst]

Re: Taxpayer may be left with huge bill for bank bailout

The prospect of the largest state intervention in financial markets in British history prompted warnings yesterday that taxpayers could face a huge bill following the credit crunch.
Amid confusion over how the scheme – yet to be officially announced – will operate, the Liberal Democrat Treasury spokesman, Vince Cable, said: "We cannot have a situation where the banks are able to privatise their profits and nationalise their losses."
George Osborne, the shadow Chancellor, said the Conservatives would support the rescue plan for the mortgage industry, but only if taxpayers were insulated from potential losses. "We are not bailing out the banks because there should be a taxpayer guarantee that they will get their money back," he said.
"There are thousands of people facing the prospect of real hardship. If the Government comes forward with a sensible idea, we will support it."
Under the Government proposals to ease the credit crisis, securities issued by the banks and backed by their mortgages would be swapped at the Bank of England for gilts, at a discount.
A bailout worth between £40bn and £150bn is widely expected in the City. The gilts would be used in the interbank market as collateral for loans.
The continued seriousness of the credit crisis was underlined yesterday when the Bank offered £13.7bn in its regular auction of liquidity and was 3.7 times oversubscribed.