Britain announced Wednesday a huge, comprehensive government plan that will pump nearly $90 billion of taxypayers' money into the British banking system to shore it up. For VOA, Tom Rivers in London has details.
The British government has moved in to partially nationalize all of the major banks in Britain.
$87.5 billion of taxpayer funds will be invested by the Treasury department into the country's eight largest banks and mortgage-lending institutions.
Prime Minister Gordon Brown says the plan had been worked on for weeks and given the current global turmoil, it was absolutely necessary to roll it out now.
"Our stability and restructuring program is comprehensive, it is specific and it breaks new ground," Mr. Brown said. "The program is designed to restore confidence and trust in the financial system and more than that, to put the British banking system on a sounder footing and to build strength for the future so that it can support jobs and prosperity right across our economy."
British Treasury Secretary Alistair Darling says the plan involves recapitalizing banks, boosting the amount of money lending institutions can borrow from the Bank of England in short-term loans and loan guarantees will be made available at commercial rates to encourage banks to lend to each other.
"It is a really a fundamental step that we are taking but it is part of a process, it is part of a whole range of things that we are doing to support the economy," Darling said. "Stabilizing the banking system is one important part of that and as I have said on many occasions, we will continue to do whatever it takes to ensure that we see this process through."
Prime Minister Brown says he has been talking to other leaders in Europe about the British program and about further actions that could be launched together.
"Because these are also global problems, global action is required," Mr. Brown said. "This is a long haul and we have invited other European countries to consider proposals we have put to them this morning on medium-term funding and are in active consultation about how we can adopt a European-wide funding plan."
Although some here say it is wrong for taxpayers to rescue the banks, Treasury Secretary Darling says to do nothing would have had untold consequences.
"If you did not do anything, there would be a very significant cost to all of us as taxpayers," Darling said. "I believe this is the right thing to do. People expect us to take decisive, firm action especially to ensure that we stabilize the banking system and help it get through this period."
The deal should for now stop the nervous talk about whether the financial institutions here are safe or not. The government intervention has come after days of intense pressure on British banks amid investor fears that they could collapse if they did not receive a large liquidity lifeline.