Brown and Darling yesterday announced a £500bn package of measures aimed at rescuing the banking system.
The equivalent of $880bn, it means they are handing over $180bn more of taxpayers’ money than Bush’s Wall Street bail out, that took three days to pass through Congress.
There was no vote on the UK banks bail out, which got the full and immediate support of both the Tories and Liberal Democrats.
The Brown/Darling rescue plan, agreed after all-night discussions with the Bank of England and the Financial Services Authority, will initially make extra capital available to eight of the UK’s largest banks and building societies in return for preference shares in them.
But the FTSE 100 index in London fell 200 points or 4% just after the measures were unveiled.
The key points of the plan are:
Banks will have to increase their capital by at least £25bn and can borrow from the government to do so.
An additional £25bn in extra capital will be available in exchange for preference shares.
£200bn will be available in short-term loans from the Bank of England, up from £100bn.
Up to £250bn in loan guarantees will be available at commercial rates to encourage banks to lend to each other.
Darling said: ‘This is beginning a process of un-bunging a big problem where banks won’t lend to each other for long periods.’
The leader of the Labour Left Economic Advisory Panel, John McDonnell MP, said: ‘This is not part-nationalisation, it’s subsidising the banks.
‘You don’t know if you are going to get your money back and there’s no control over the banks.
‘In addition, the conditions the prime minister has attached to any loans are virtually unenforcable.’
He added that the injection of taxpayers’ money ‘has to be paid for.
‘And it will be paid for by increased taxes, more cuts in public expenditure, which will mean reduction in demand in the economy overall, which means the recession will be longer and deeper.
‘My constituents, and people across the country, will be at great risk of losing their jobs and their homes.
‘It’s not a very good deal. Even if it stabilises the system, it will stabilise it only for them to return to binge banking that they’ve done in the past.
‘We’ll go through the same problem in the future if we don’t reform the banking system.’
He stressed: ‘This isn’t partial nationalisation, this is simply subsidising a number of banks. What we are doing now is propping up the system.
‘It’s like your next-door neighbour having a party, a real binge, ordering the champagne, buying a new car, going off on holiday and sending you the bill to pick up the tab.
‘The prime minister needs to rethink. we may be back here in a few weeks’ time, having to rethink.’
• The International Monetary Fund (IMF) said the world economy is entering a major downturn, and will only pick up modestly later in 2009.