Sky News business presenter Emma Crosby

This morning the Bank of England confirmed what many in the city heard on the grapevine last week that it's to stump up a £50bn rescue package for UK lenders hit by the credit crunch.

Yes, you did read it correctly. 50 billion pounds. An unprecedented step and an immense amount of money. But it doesn't stop there.

£50bn might not be enough, it may take an eye watering £100bn to ease the funding crisis blighting the Square Mile.

And here's the worrying bit. It's being paid for by... yes you guessed it You and Me. Once again the tax payer is having to stump up cash to support the banking sector.

First it was Northern Rock and now this. In total it's estimated the UK government will have had to loan £80 billion to beleaguered banks underwritten by public funds. Many of you are furious.

One correspondent writes "Why should the taxpayer bail out the banks when the banks announce annual profits of hundreds of millions of pounds every year?"

Another of our viewers says "Ordinary working people have all seen a steady erosion of their personal finances and tightened their belts. It's time for the city fat cats at the banks to do the same and re-invest those many billions they have made every year at our expense."

So is this a reward for poor business decisions? Why not let market forces dictate what happens to lenders who are having problems with their balance sheet?

The reality is it just isn't that simple. Something needs to be done to alleviate what's a dangerous financial situation that's starting to affect the wider economy.

As Peter Spencer from the Ernst and Young ITEM club told me it's a question of "shoot now ask questions later". In my opinion it would be more irresponsible to not help the mortgage market get moving again as that would only mean more pain for borrowers.

And to allow a bank to get into serious trouble or even go bust could have disastrous systemic fall out for the whole economy.

City experts warn us not to expect lenders to start dishing out loans freely again. It's going to take a long time for the benefits to trickle through to us. And don't expect this to turn the housing market around too.

Let us know what you think...

Comments

[pete. brighton 22 Apr 2008 11:59:04]

The trouble with this so called credit crunch is that it has taken on a very sinister and scary momentum. There are people that are feeding this frenzy for reasons of thier own and I suspect it is to bring down the government or at the very least make sure that they do not win the next election. The problem is that these selfish individuals and they know who they are, are causing a complete collapse of the real economy. If you want brown out then i think you have already achieved your goal, now leave the rest of us alone, we want to live happy content lives ok!

[Elizabeth Davies Cape Town 22 Apr 2008 08:58:38]

This 50 billion BOE handout is a knee jerk reaction, and was put in place too early. The government are panicking, they are looking to get the electorate back on sides, this is not the way to go, the dust should have been allowed to settle first and see what the banks could have done for themselves, like the RBS have done. Watch this space....will we have more "Bank of Brown" on the High Streets.

[les ashford kent 21 Apr 2008 22:14:54]

tell me how long before we bail out Shell or BP or for that matter when do we Nationalise Tesco and Sainsbury. Switch the lights out Gordon it's time to go.

[Pere Raphael: London 21 Apr 2008 17:53:26]

I appreciate that the government cannot allow a bank to go bust because of the potential implications for the rest of the economy.
Banks operate the law of the jungle, survival of the fittest. They have made vast amounts of money for their shareholders at the expense of us – their customers. I think we need to let one or two banks which are badly run go bust. One of the others will acquire its books and assets, as has happened with Bear Stearns in the US. That will teach the remaining banks to observe common sense when throwing money at people who cannot afford to pay them back.
As it stands our economy is built on debt and it won’t be such a bad thing to let the situation take its natural course. Perhaps that will force the government to embrace proper fiscal policy to encourage and build an economy based on proper economic foundations rather than one built on personal and governmental debts of unprecedented proportions.
Imagine pumping £50bn into the economy in the form of tax cuts and properly vetted infrastructure investments. Imagine people saving or going out to spending money they have actually earned and imagine how much that will stimulate the real economy.

[Khalid 21 Apr 2008 16:50:45]

Sir
In essence, you cannot blame ordinary folk for thinking the worse, particularly as facts support the theory that over the past decade, all the nation has endured is take take take.
Whilst it is an argument that banks provide the financial backbone to many an emerging economy, if the apple cart is ridden with bad apples, then rather than throwing away all the apples, prudence tells us to throw away the bad ones. So, you ask, why doesnt this work when it comes to banks?.
Well, the policies that have created such turbulant times, have emerged over the last 10 years, and would you believe it, PM Brown was Chancellor Brown darling? I know, it bought tears to my eyes as well.
The humble taxpayer who has no choice where its money is spent, is further humilitated by virtue of the fact that when it makes legitimate and unexpected mistakes caused by global market turbulance, it is thrown onto the streets, yet in the absence of a referendum surrounding the EU decision when it decreed state subsidy to BA unlawful, the EU appears to tune into a sleeping sattelite channel.
As for the housing market and its turaround, it would be of greater benefit for each household to receive a 25% reduction in council tax, whilst at the same time the upcoming mayor thinks of ways to ease the financial congestion and provide low emission free parking in London for those who pay the congested charge.
Other than that, the nation is [All Cried Out-Allison Moyet].