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A bad bank is not such a bad option

US President Barack Obama’s $800bn rescue plan for his country’s economy was signed off by the Senate last week.

There’s no doubt Obama is in a hurry to get hold of the money to work quickly to inject some activity back into the system.

The US was the epicentre of the global downturn and it is likely that it will lead the recovery.

Obama’s stimulus plan is as bold as it is big and fortunately for all our sakes it seems the new president is capable of turning things around.

Some $500bn has been earmarked to purchase toxic mortgage assets from banks in an attempt to stop the rot permeating throughout their balance sheets.

As I have said before, I believe the UK should follow suit and cut straight to the economic end game.

Our banks are not lending money despite being given billions of pounds of taxpayers’ money because the unknown losses on toxic assets have them in a state of paralysis.

The government must act to remove these assets before it is too late or it should bypass banks entirely and start lending money directly to householders and businesses.

We are entering a vicious and potentially devastating cycle during which we are starting to see high profile businesses going bust and making staff redundant in big numbers because their bankers are unwilling or unable to continue to support them.

So a bad bank is not a bad option.

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