Government bonds proposal allows banks to 'have their cake and it eat it'

17 April 2008 / by Rachel Mason
James Caldwell, director at comments on the Government's proposal to transfer mortgage-based assets into Government bonds:

"At a time where the private sector is not prepared to put any liquidity into the market, the Government has stepped up to try and ease the crisis. This sort of model has been successful in other countries, like the US and Sweden, and it could be just what the UK economy needs.

"However, although action is needed, we cannot be in a situation where banks are having their cake and eating it too. By exchanging their high risk mortgage-based assets for lower risk Government bonds the banks are being allowed to enjoy their profits while pushing all the risk onto the tax payer."