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ClimateNE & Climate Change Schools Project support the move to a low-carbon, resilient economy and help businesses avoid risk and realise commercial opportunities. Posts by Jen Atkinson, Krista McKinzey and Harriet Thew » THE banking bail-out system has moved into its second - and most crucial - stage.
Phase one has seen the Government underwrite huge amounts of money for banks in a bid to kick-start the lending market.
But with a few exceptions, the plan has failed big style.
Cash-strapped homeowners and businesses are still not seeing the colour of banks' money, with only 8% of respondents to a Federation of Small Businesses survey (FSB) claiming banks had made the Enterprise Finance Guarantee Scheme available to them.
Part of the Government's multi-billion pound rescue package, the scheme was supposed to secure up to ã1.3bn of additional bank loans to small firms with a turnover of up to ã25m.
In practice, this has not been the case and direct state intervention is needed now to unblock the lending log-jam.
The Government's asset protection scheme could be just the tonic.
It will effectively use taxpayers' money as insurance against dodgy assets by hiving them off into a separate so-called "bad bank" - boosting the value of banks' battered share prices and finally giving them confidence to start lending again.
The demand for mortgages and business loans is still strong so there's no reason why the scheme cannot spark the first green shoots of economic recovery.
The downside is the longer-term effects.
If businesses cannot afford to pay back the money they have borrowed, the bill will lie firmly at the door of the taxpayer.
This is a very probable scenario given that toxic loans, by definition, carry a high risk of default.
It is difficult to see what else the Government can do.
Without direct intervention the credit markets will remain frozen, delaying economic recovery and leaving taxpayers far worse off.
Higher taxes are a necessary trade-off for escaping the worst recession in recent memory.
Ministers will be getting their prayer mats out in the hope that they have finally cracked the lending crisis.
If this measure doesn't work, nothing will.
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