The Bank of England is now propping up THEIR credit crisis, too.

(3 pm – promoted by ek hornbeck)

The Bank of England has announced a £50 billion plan to help prevent the ongoing credit crisis that has seemingly gone world-wide since the problems became evident in the USA.

£50 billion is $99.82 billion in US Dollars.  That is a lot of money and shows that the underlying fundamentals of the world markets are, unlike what the Bush administration tells us, becoming more and more shakey by the day.

From BBC:

Banks will be able to swap potentially risky mortgage debts for secure government bonds to enable them to operate during the credit squeeze.

The Bank’s governor, Mervyn King, said the scheme aimed to improve liquidity in the banking system.

It should also increase confidence in financial markets, he added.

Under the scheme, banks will be allowed to swap their “high quality” mortgage debts for government securities.

The British Government is allowing banks to exchange mortgage debt for Government backed bonds.  Sounds like another bail-out at tax payers expense, wouldn’t you say?  Only, once again, the tax-payers aren’t the ones getting bailed out.

The swap scheme, which starts on Monday, will be for a period of one year and may be renewed for a total of three years.

It will only apply to mortgage debts on banks’ books at the end of 2007 and the swaps cannot be used to finance new lending.

The central bank anticipates that initial take-up of the scheme will total £50bn but there is no cap on lending.

I do like the use of the word “scheme” here.  It seems somehow appropriate.  The fact that their is no CAP on the lending tells us that it is likely more than £50bn will be invested in this bail-out.

Prime Minister Gordon Brown said the scheme was one of a range of measures to protect British workers from the turbulence in America’s financial and housing markets.

“We can get markets working again in a way that we can ensure that jobs can be continued, and of course businesses can have the finance they need,” Mr Brown said.

PM Brown sure called a spade a spade with this one and thumbed his nose a bit at the US and Fed economic mistakes in the mortgage industry that have led to this crisis.

Meanwhile, here in the US, not just the financial services sector, such as the Bear Stearn meltdown is reporting bad news.  

Wachovia Bank announced on April 14th a net loss in the first quarter of 2008 of $393 million, or -$0.20 per share vs a profit of $1.20 per share one year ago.  They are also cutting their quarterly dividend payments.

Just today, Bank of America, the second largest bank in the US announced their own less than sterling first quarter numbers.

From CNN Money:

Bank of America suffered a 77% plunge in profits last quarter, much more than expected, but managed to stay in the black, the company reported early Monday.

The Charlotte-based bank saw net income plunge to $1.21 billion, or 23 cents a share, from $5.26 billion, or $1.16 a share, in the year earlier period.

Analysts surveyed by earnings tracker Thomson First Call had been expecting earnings of 41 cents a share.

“These results clearly did not meet our expectations,” bank Chairman and CEO Kenneth Lewis said in a statement. “The weakness in the economy and prolonged disruptions in the capital markets took their toll on our performance.”

The hits just keep on comin’.  

This may be the year to begin that container gardening that you have been thinking about on your back patio.  Food prices are skyrocketing along with the price of gasoline and energy in general.

x-posted at EENRblog

20 comments

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    • brobin on April 21, 2008 at 7:16 pm
      Author

    lettuces and many other vegetables grow very nicely in containers if you don’t have a lot of garden room in your yard.

    • pfiore8 on April 21, 2008 at 7:21 pm

    Exxon Mobil is cashing in big time…

    container gardening huh? sounds like a v.v.v. good idea.

    good piece, brobin!

    • RiaD on April 21, 2008 at 8:01 pm

    thanks ver much!

    ♥~

    • Robyn on April 21, 2008 at 9:35 pm

    As in the phrase Ponzi Scheme.

    • Metta on April 21, 2008 at 9:49 pm

    the economists or some group, (media?, government?) have almost completely dehumanized us by regularly refering to almost everyone as “consumers”.  Reminds me of the saying I heard in the 80’s “You’re born, you buy, consume, then die”

    To some extent, even though I consciously resist ( or can’t afford) conspicuous comsumption, I feel like my mental frameset is somewhat affected by this.  I think of the local businesses I want to remain in our community and I feel a responsibility to “consume” their products.

    I guess with banking system bailouts, the government is able to control where the extra “money” goes more than if it goes directly to the consumers.  It shows a lack of faith and lack of caring.  Although, bonds aren’t cash are they?  I don’t understand how that works.  Does it become liquid for the banks?

    My garden needs serious work before I can plant. The snow keeps coming!  Peas, lettuce and cold things are the only plants I could even consider putting in the ground.  Bulk veggie starts are usually quite reasonable when the time comes.  Problem number one, weeds don’t care if it’s still freezing.

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