BRITISH taxpayers face a multi-billion-pound bill as part of a plan to rescue the stricken mortgage lender Bradford & Bingley.
The nation's biggest mortgage lender for landlords is due either to be nationalised or broken up and sold off by today after its survival as an independent bank proved impossible.
Downing Street called an emergency summit with banking chiefs on Saturday to look for a solution. It is the second rescue of a leading British bank in two weeks, fuelling fears for the fate of the banking system.
In a sign of the far-reaching effects of the credit crisis, the home furnishings retailer MFI also came close to collapse.
Amid concerns that Bradford & Bingley could be a rerun of the Northern Rock debacle, the Treasury and the Financial Services Authority held emergency talks with the lender's executives and potential suitors to sell it off.
Alistair Darling, Britain's Chancellor of the Exchequer, was involved in the discussions, with the Prime Minister, Gordon Brown, remaining close by.
Many of Bradford & Bingley's 337 branches and the deposits of 2.5 million savers look likely to be sold to the Spanish banking giant Santander, which owns the British lender Abbey, and is absorbing yet another, Alliance & Leicester.
Unlike the sale of HBOS to Lloyds TSB two weeks ago, this deal will require public support, with many of the 1 million Bradford & Bingley mortgages left with the Treasury. As a result, taxpayers are likely to be left holding the mortgages most likely to default from the £40 billion ($88 billion) portfolio. This will increase the size of the national debt, though the ultimate bill for taxpayers is likely to be far smaller, depending on how many of the lender's mortgage holders default.
A Treasury spokesman said: "The Treasury, the FSA, and the Bank of England are working closely with Bradford & Bingley to consider the implications for their business of the recent financial turmoil."
Bradford & Bingley encouraged hundreds of staff to go into branches on Saturday to handle inquiries from worried savers, to avert a repeat of the chaotic scenes outside Northern Rock branches last September. Bradford & Bingley was at particular risk of collapse because of its exposure to the hard-hit buy-to-let sector and its reliance on funding from the stricken money markets.
With the Bank of England monitoring the action closely, some suspect it is plotting an emergency interest rate cut in the event that the situation deteriorates substantially this week.
The Bank of England is expected to cut interest rates from 5 per cent on Thursday week, with some saying that it may even surprise markets with a half percentage point cut.
The Sunday Telegraph
