The “Best Financial Firm Rescue of the Year Award” goes to the British government for its new bailout of Lloyds. The program both saves the bank and insures that much of the money put into it by the UK will go directly to businesses that need capital to stay viable or expand.
According to the AP, the government will back about $360 billion in toxic assets at the bank. But, the arrangement goes much further than that. In exchange the safety net the UK will own 65% of Lloyds. And, the AP reports “As a condition of the deal, the bank promised to increase lending by 28 billion pounds ($39 billion) over the next two years, the majority to businesses. ”
The American system may save a bank, but that does not necessarily force capital to businesses and consumers who need money which in turn should help rebuild the lifeline of credit which in necessary to create jobs and consumer spending.
The Lloyds deal is probably as good a model for reviving the credit system as any.
Douglas A. McIntyre
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