Bank of England to bail out banks?

The Bank of England looks set to shore up British banks today by £50m of tax payers money. It will effectively guarantee bad mortgage debts that banks migh run up, although critics are saying that this will enable banks to profit from their good decisions, whilst taxpayers pick up the bills for the banks' mistakes.

But this assitance doesn't come with any guarantees that the banks will follow the Bank of England's lead and reduce interest rates.

There are concerns that too many cheap mortgage deals have been scrapped. The number of mortgage products available is down from 15,599 in the summer, to under 4,000 currently.

Liberal Democrat Treasury spokesman Vince Cable said: 'It is obviously necessary for urgent action to be taken to unblock the mortgage market and to break the crippling effects of the credit crunch.

'However, we cannot have a situation where the banks are able to privatise their profits and nationalise their losses. Since the mortgages from the banks are of inferior quality and higher risk than the Government bonds which they are replacing, the implication must be that taxpayers are shouldering the risks and losses of the banks. This cannot be right.

'We need urgent reassurances from the Government that the exchange is taking place on a discounted basis so that the banks and not taxpayers carry any losses.'