"An Extraordinary Day"

This how the BBC began the evening news, then straight to Gordon Brown's recorded comments from earlier today. In 12 years in England I have never heard anything even quite similar.

There are three main elements to the government’s package. First, the Treasury has made up to £50 billion available to banks as injections of state money to raise their “tier-one” capital, the bedrock support for banking business. Eight large lenders—Abbey, Barclays, HBOS, HSBC, Lloyds TSB, Nationwide Building Society, RBS and Standard Chartered—have said that they will together increase their tier-one capital by £25 billion by the end of the year. A further £25 billion is available for all institutions, which include British subsidiaries of foreign banks. In return, the Treasury will take interest-paying but non-voting preference shares (or permanent interest-bearing shares for building societies) in the institutions.

Second, the government is doubling the amount of money available to banks through the Bank of England’s “special liquidity scheme”. This facility, which started in April, allows banks to swap illiquid mortgage-backed securities for Treasury bills, which can be readily cashed, for up to three years. Alistair Darling, the chancellor of the exchequer, indicated last month that £100 billion had been made available; now he has raised that amount to £200 billion.

Third, the Treasury will provide guarantees for new short- and medium-term debt issued by banks for periods of up to three years. It expects the take-up of this guarantee to be around £250 billion.

This adds up to over £400 billion or bigger than the US plan passed by Congress last Friday. One cannot question the ambition of it all.

"Extraordinary times call for the bold and far-reaching solutions."
Gordon Brown