Britain to unveil plan for lending
LONDON - The Bank of England will today unveil a plan to swap about $100 billion worth of government bonds for mortgage-backed securities to lower credit costs, people familiar with the matter said.
The plan will "unfreeze the situation we've got at the moment," Chancellor of the Exchequer Alistair Darling told the BBC, without specifying how much would be made available. "What the Bank of England will do is, in effect, lend the banks that money. In the meantime, the Bank of England will take a security."
Prime Minister Gordon Brown's government is trying to encourage lending after a surge in borrowing costs prompted banks to withdraw their best mortgage offers, threatening to exacerbate the worst housing downturn since 1992. The plan is a change of approach by the Bank of England after three interest-rate cuts since December failed to ease the logjam.
Darling will speak in Parliament and will update lawmakers on the progress of the Bank Act, which would give authorities power to seize failing banks.
