Another day, another desperate throw of the dice (18)

Up to now, the UK and the US have been taking the long way round:, first encourage/allow the banks to make reckless loans, which the banks then slice and dice and sell on to investment firms, and then when it all goes wrong, bail out or nationalise the banks with billions of taxpayers' finest.

But why bother waiting for the banks to fail first? Why not short-circuit the whole thing and just have the government make the reckless loans in the first place? That's the approach now being taken in the UK:

"The Chancellor's plan involves effectively underwriting the majority of new mortgages in the UK to encourage big investors to give badly needed money to lending banks.

The proposed scheme means the UK Government would guarantee mortgage bonds, where banks parcel up individual home loans and sell them to investment firms. When the system works properly, banks have a source of money to loan to customers and investors get a return.

The total value of new mortgages involved has been estimated as up to £100bn... "

Via LP