Banking System To Get £50bn Boost
The Bank of England is preparing to inject a reported £50bn into the banking system to ease the effects of the credit crunch.
Bank of England to take action
It is expected to set out plans to swap potentially risky mortgage debts in return for Government-backed bonds.
Chancellor Alistair Darling will make a statement on the situation to the House of Commons as it returns from recess.
Critics have warned that the taxpayer is taking on the banks' risks and could be left with heavy losses if the property market keeps dropping and homeowners default.
But Mr Darling insisted the money will have to be repaid.
Banks have been reluctant to lend money to one another following the collapse of the sub-prime mortgage market, limiting the amount of cash available for new home loans.
"We are trying to unbung that situation so that the Bank will be making money available to the British banking system," he told BBC 1's Andrew Marr programme.
It will be lending the money, so it's got to be repaid, and we will take securities in return for it.
"But the idea behind it is that it will open up the market and it will begin the process of opening up the mortgage market which will help householders."
Liberal Democrat spokesman Vince Cable warned: "It is obviously necessary for urgent action to be taken to unblock the mortgage market and to break the crippling effects of the credit crunch.
"However, we cannot have a situation where the banks are able to privatise their profits and nationalise their losses.
"Since the mortgages from the banks are of inferior quality and higher risk than the government bonds which they are replacing, the implication must be that taxpayers are shouldering the risks and losses of the banks. This cannot be right."
