The government in the UK is about to unveil a new program to help save businesses and banks. The plans already in place in there have put money into large banks in a fashion not unlike the actions of the Treasury and Fed in the U.S. But, the UK will take that further.
According to The Times, "The next steps to be unveiled within a fortnight are set to include guarantees for businesses of all sizes and official insurance for banks to attach to new securitisations of mortgages and other loans." In other words, the worst assets of banks will get a safety net and businesses will have an easier time getting credit.
The business loan guarantees are a stroke of genius, and it surprising that more of that is not in the U.S. stimulus package. Companies in America are having a terrible time getting access to credit. That leads them to cut jobs and capital expenditures. When their situations get particularly bad, they cut expenses sharply and fire people. That is hardly a formula for driving any recovery as the recession deepens.
If the UK programs get a strongly positive reception from UK business and economists, it may pay for the U.S. Congress to borrow a few pages from the books of their friends across the Atlantic. Aid that works quickly trumps programs that take months to implement, especially when time is short.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
1-11-2009 @ 2:55PM
Taking A Gossip Break said...
After 9-11 America became a nation where it was presumed by those in power that our government and our way of handling capitalism is the best in the world. Unfortunately, that is not true, as statistics show that many EU countries have much higher standards of living than we do, and they are not involved in a bank breaking war. I read one author who says that most Second World Countries want to follow the EU market: a business market that forges a middle road between capitalism and all the good it brings, and socialism, which makes sure all of the EU citizens have a safety net. Perhaps it would do us well to follow that model too. As things are now, we are not taking care of the American people.
1-11-2009 @ 10:08PM
Gary said...
For the government to guarantee failure is hardly in the interest of the economy. As we are about to find out with the Detroit bailout, the added money will follow the previously wasted cash into a hole with the only result being poorer taxpayers (who foot the whole bill) and noncompetitive companies whos products are not wanted. For the government to dictate those products is not an answer, given the past performance of most government programs. Socialism is a system for weak, expiring countries to prolong their own existence by having the productive support the weak and helpless. No country should go that way until they have admitted the failure of their system. If that's the case, then immediate change of that system is indicated, back to a condition where capitalism works, whatever that entails. To those who read a bit, "Who is John Galt?"