JLR Gets Bail-Out Amidst Much Debate

Why does this Lord look forlorn?  He’s just helped unlock a radical £50bn fund created as part of yesterday’s second bank bail-out.

The Bank of England can now buy the assets that companies use in order to raise finance, including corporate bonds and syndicated loans, in the latest bid to kick-start lending in the UK.

The news came as Lord Mandelson flew to Delhi on a week-long trip which is expected to include meetings with senior representatives at Tata Motors, Jaguar Land Rover’s new Indian owners, which has already pumped an estimated £600m of extra cash into the company without government help.

As in America, yesterday’s latest government rescue package is aimed at encouraging banks and financial institutions to buy more bonds – and keep big companies afloat through the recession.

But not everybody agrees. The first bank bail-out back in October threw £37bn at the “recapitalization” problem and that has not put an end to the UK’s credit crunch. This one, however, includes a second measure which will guarantee mortgage loans, effectively offering mortgage customers a taxpayer loan to encourage them to buy a new car.

Debt-ridden banks will be offered insurance against losing more money from their current spate of bad debts, although ministers stopped short of creating a “bad bank” to buy up those toxic assets.

The £50bn fund will allow the Bank of England to buy high-quality private sector assets, financed by the issue of Treasury bills. The bail-out will get under way on February 2…also known as “Groundhog’s Day” here in the States.

Announcing the package in the Commons, Chancellor Alistair Darling said: “This will enable larger companies to get the funding they need at a lower cost.”

But, condemning the lack of detail about the fund, Shadow Chancellor George Osborne claimed it amounted to “printing money” – a claim Mr. Darling predictably denied.

And Vince Cable, the Lib-Dem treasury spokesman, insisted the plans did not go far enough, adding: “The Government must bite the bullet on the public ownership and control of the banks, to ensure that lending is maintained to sound companies.”

Whatever side of the fence – or the pond – you sit on, it seems that there’s some awfully heavy gambling going on. The best thing you can do is hedge your bets…and go buy a new Land Rover.