New Government bailout is blank cheque

3.44.00pm GMT Mon 19th Jan 2009

The Liberal Democrats today attacked the Government’s latest bank bailout. Liberal Democrat Shadow Chancellor, Vince Cable, said that without a thorough review of all the assets that are being underwritten, ministers were effectively writing a blank cheque to the banks.

Vince Cable said:

"This is potentially another blank cheque for Britain's banks.

"The Government is now proposing to underwrite billions of pounds worth of debt which could leave taxpayers open to vast losses.

"Ministers are offering hardly any details about the terms of this underwriting. Taxpayers are being signed up to yet another bank bailout, when it is clear the Government hasn't done its homework. The £100bn insurance of bad debts owned by the banks could result in enormous losses for taxpayers, since these assets are being insured in a falling market and there are still further big losses to come in the property market.

"I was staggered to hear the Prime Minister announcing that he is putting in place proper controls to monitor the use of taxpayers' money.  They should already be there. Why weren't the banks required to make a full declaration of their bad loans when the £37bn was invested?   

"With RBS now 70% publicly owned, there can be no more excuses for it not to start lending at reasonable levels to viable businesses and individuals."

Vince Cable also welcomed the Government's belated move to stop Northern Rock running down its mortgage book.

Vince Cable continued:

"This is welcome but belated news. The financial system is in a very different state from when the terms of the nationalisation of Northern Rock were agreed.

"The Liberal Democrats have been calling for several months for Northern Rock to concentrate on lending to solvent businesses and individuals."