Bailout MkII, Monday: what I know....
Here's what I've gleaned about the bailout the UK government is set to launch on Monday morning. There are two elements, the long-touted insurance scheme for toxic debts, and a range of measures to free up sources of funding for banks.
Significantly, the government will not be announcing a fully fledge asset insurance scheme, as trailed in various papers. It will announce the principles and then "if the banks are interested" they will be negotiated with on a case-by-case basis I've been told.
Frankly, what I surmise from this, is that the much hyped discussions with the banks this weekend have not produced agreement. If there was industry-wide agreement on a bad debt ringfencing scheme it would have been announced tomorrow. Also, clearly, there is no "bad bank" going to be set up for the taxpayer to buy toxic assets.
The more interesting aspect of tomorrow therefore looks to be a raft of new govenrment guarantees on funding. The Crosby report recommended the taxpayer underwrite new mortgage issuance, and Darling accepted this in principle. If, as I expect, this is announced concretely tomorrow the question is, does the UK get an activist, publicly controlled mortgage originator as per Fannie Mae, or a "power". If it is the latter, who wields the power and do they do press interviews is my first question?
Anyway there you have the latest: no bad bank, no industry-wide insurance scheme but a commitment to provide asset insurance to any bank that wants it, and a far-reaching but unspecified provision of further billions of funding sources. Clearly, the taxpayer exposure involved in all this will need to be calibrated.
I think we need to see the details of Bailout MkII before saying anything more: they will be complex. I will try to unpack them on Newsnight tomorrow night, which will mean junking a long-planned feature on the economic legacy of George Bush. See you at 1030pm GMT Monday.
UPDATE: It seems the government will also up its stake in RBS, as reported in the Telegraph. We are now looking at owning 70% of the bank's shares (compared to 60% before).