US Bail Out Failure Demands Decisive Action From Gordon Brown

Labour MP John McDonnell, chair of the Left Economic Advisory Panel, has called for decisive action from Gordon Brown in face of failure of US bail out plan.

John said:

"After Bradford and Bingley and the failure of the US bail out plan we are facing further collapses and a long and deep recession. Simply addressing this crisis in Britain on a case by case basis means that the economy is staggering from one crisis to another into recession.

"The root cause of this crisis is the Government's policy of allowing the housing market for over a decade to be used for profiteering speculation rather than to provide homes. The resultant crisis of confidence in the financial institutions has created a self-fulfilling crisis of liquidity.

"Gordon Brown must take decisive action before it is too late. I am calling upon him to bring the home loans industry under pubic ownership and control and override the Bank of England Monetary Policy Committee to cut interest rates decisively."

John McDonnell on the latest crisis

Labour MP, John McDonnell has warned Gordon Brown against any plans to follow the US model of bailing out the bad debts of British banks and financial institutions.

This comes as the Treasury has announced the nationalisation of the debts of Bradford & Bingley, while Santander is rumoured to be taking over the savings and branches side of the failed bank.

John McDonnell said:

"People will be extremely angry if Gordon Brown tries to use taxpayers' money to implement a US style bail out of the bad debts of Britain's financial institutions. Every year we have witnessed obscene levels of bonuses doled out in the City.

"Ordinary people struggling with housing, food and fuel costs should not be forced to pay for the profligacy of these city speculators. Allowing the City to pass on its poor investments to the taxpayer whilst retaining the cream of the crop is simply not acceptable. Nationalisation of all the assets of an institution is the only fair way of balancing the risks to taxpayers.

"Given the current liquidity trap the Prime Minister needs to introduce an immediate and significant cut in rates if we are to avoid further institutional collapses."