UK Buys Up Bank Shares in Radical Bailout

Cost of drastic rescue package could top $800B
By Rob Quinn,  Newser Staff
Posted Oct 8, 2008 4:29 AM CDT
A man walks past a sign in the window of a branch of The Royal Bank of Scotland in London yesterday.    (AP Photo/Kirsty Wigglesworth)
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(Newser) – The British government will become part owner of the nation's biggest banks with a mammoth $88-billion rescue package for the troubled institutions, the Wall Street Journal reports. Under the plan, swiftly assembled after UK bank stocks plummeted in trading yesterday, the government will purchase non-voting shares in eight of the largest banks as a way to provide extra capital to the institutions.

The UK deal aims to boost capital so banks can restart lending. A further $360 billion will be made available for short-term borrowing to restore liquidity. A company will also be established to provide up to $360 billion in loan guarantees. The plan marks the start of "a process of un-bunging a big problem where banks won't lend to each other for long periods," said Finance Minister Alistair Darling.