Commercial banks will be allowed to temporarily swap some $100 billion in troublesome mortgages for securities backed by Britain's central bank under a plan announced today, the Wall Street Journal reports. The move by the Bank of England, aimed at boosting liquidity and confidence in the banking system, follows similar action by the US Federal Reserve.
The swaps will last for a year, and are renewable for up to three years. British PM Gordon Brown, who’s pushing for action as consumer frustration mounts and housing prices sink, is also calling for banks to ease loan restrictions, and for more transparency. But analysts tell the Journal the move may not be enough to counteract the credit crisis in the UK, which doesn't have a Fannie Mae or Freddie Mac to cushion the mortgage market.