Sunday, July 20, 2008
Darling may borrow to save banking system from collapse
The Treasury may be planning to raise the limit on public borrowing in an effort to give it "room for manoeuvre" for a potential rescue operation for the banking system, a leading expert has suggested. It comes amid growing disquiet about the funding position of Britain's biggest mortgage lenders, with banking groups urging the Treasury or Bank of England to extend its mortgage support scheme to cover home loans issued since the start of the year. Spencer warned Darling may have to increase the debt limit to 50 per cent of GDP or beyond if he intends to accommodate a possible support scheme for embattled lenders. "The Treasury knows the situation facing the mortgage lenders is pretty dire. I suspect that they may now be considering looking at gilt-edged funded long-term lending."