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SCOTT JAGOW: The amount of money that governments are still pledging to the financial industry is staggering. Today Britain announced a second massive bailout plan for banks. In October, Britain invested $55 billion in its banks. This package is more about its toxic assets. It’s basically an insurance plan. Our European correspondent Stephen Beard joins us from London. Stephen, what does that mean — an insurance plan?
STEPHEN BEARD: The way this will work is to get participating banks to sit down with the British government and identify those difficult assets which they can’t sell that are slowing down the whole level of credit through the economy, and for the British government then to say ‘OK. We will insure these assets. If you are forced to sell these assets, we will pick up 90 percent of any potential losses.’
JAGOW: And where does that leave the British taxpayer?
BEARD: Well potentially in a very large and very deep hole. The British government won’t put a precise figure on the extra liability because it says we don’t yet know the total number and amount of the troubled assets that we’re talking about here. However, there have been some extraordinary figures flying around — $300, $400, perhaps even $500 billion.
JAGOW: The whole idea of these plans is to get banks to open up credit. What’s in there to make sure that the banks will do that?
BEARD: There is, the government says, a legally binding agreement which participating banks must sign up to which will commit them to both lending responsibly and achieving very precise and very clear targets for increased lending. Now, I’ve spoken to the Treasury this morning and they’re a little vague about how they’re going to enforce this committment. Nevertheless, the government says ‘We have that commitment,’ and that is going to do something to pump more money through the economy.
JAGOW: Alright, our correspondent Stephen Beard in London. Thank you.
BEARD: OK, Scott.