The second major rescue package for UK banks in three months includes very large (and in at least one case potentially uncapped) packages of guarantees and insurance offered to the banks by the state on terms that are not clear.  This is very much in the US tradition, promoted by the US Treasury, the Fed and the FDIC, of maximising moral hazard for a given amount of immediate crisis fire-fighting.  In the incoming Obama administration, both Treasury secretary Tim Geithner and NEC chair Larry Summers have had many years of experience, in the US and all over the globe, throwing good money after bad in pointless bail-out packages.  The trio of Ben Bernanke, Geithner and Summers are likely to produce a veritable moral hazard monsoon.

Ansonsten beschreibt Buiter einen Prozess, wie England die Banken, die als systemrelevant angesehen werden, verstaatlicht und deren giftigen Wertpapiere in einer bad bank gebündelt werden können.

All of which leads Alphaville to reprise this popular British pop song:

“We’re all going on a summer mortgage holiday.
No more working for a month year or two.
Fun and laughter on a summer mortgage holiday.
No more worries for me and you.
For a week year or two.”

“We’re going where the sun shines brightly banks lend lightly.
We’re going where the sea is pound is blue.
We’ve seen it depression in the movies.
Now lets see if it’s true.”

“Everybody has wants a summer mortgage holiday
Doing things they always wanted to.
So we’re going on a summer mortgage holiday
To make our Gordon’s dreams come true
For me and you. “