King admits Bank cannot solve mortgage crisis

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Bank of England governor Mervyn King has admitted no form of regulation or special funding will solve the current mortgage lending crisis.

Speaking to the Treasury Select Committee today, King says financial market conditions are worsening and the banking system as a whole remains short of capital. The Bank is expected next week to outline the permanent replacement to its Special Liquidity Scheme, which expires on 21 October. Under current terms, lenders have the ability to exchange mortgage securities in return for Treasury-backed gilts. However, King says the new proposals “will not and can not” solve the shortage of lending finance. “The objective of the new facility will be to provide short-term liquidity insurance t...

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