British government unveils massive financial rescue plan

LONDON – The British government Wednesday unveiled a massive rescue plan for its ailing banking system after days of unrelenting bad news for the financial industry here.

Alistair Darling, the chancellor of the exchequer, announced that the government would make a cash infusion of up to $87 billion for banks to stabilize their balance sheets. In exchange, the government would receive special shares in the banks that could turn a profit for taxpayers if the banks recover.

Separately, at least $348 billion would be made available for short-term borrowing to help financial institutions with their day-to-day operations, said Darling, who is Britain's top economic official.

He declared that such "comprehensive measures" were necessary "to ensure the stability of the financial system and to protect ordinary savers, depositors, businesses and borrowers."

The much-anticipated announcement failed immediately to stanch the hemorrhaging of the London stock market, however. After losing the most points ever in a single day on Monday and then rebounding slightly on Tuesday, the London index was down by nearly 3% within half an hour of the opening bell Wednesday morning, despite efforts by Darling's office to work through the night in order to unveil the rescue package in time to reassure investors at the start of trading.

Bank shares have taken a beating here over the past several days as rumors of imminent government intervention trickled through the City, London's financial district.

The bailout plan essentially means that the government will be partially nationalizing some of the country's largest financial institutions. Eight banks and savings-and-loan firms, including big names such as Barclays and Lloyds TSB, have already signed up for the plan, and more are expected to follow suit.

The aim is to restore confidence in the banks and to encourage them to start lending to each other again.

http://www.latimes.com/business/la-fi-london9-2008oct09,1,517349.story

British government unveils massive financial rescue plan

British government unveils massive financial rescue plan

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