Osborne’s next trick: sub-prime companies?

About 15 years ago, Bill Clinton wanted to promote home ownership among the low-paid, but was annoyed that banks wouldn’t lend freely or cheaply to that group. So, the federal government intervened with Freddie Mac and Fannie Mae selling government-backed mortgages at knockdown rates. Nothing showed up on the national debt, because the loan would — in theory — be repaid. The seeds for the sub-prime crisis were sewn.
 
Today, George Osborne wants to promote recovery and is annoyed than banks won’t lend freely or cheaply enough to small businesses. So, the Treasury will intervene by lending money indirectly by backing a new bond market that lends cash to small companies. The loan won’t show up on the nation’s books, because the assumption is that the companies will repay. This will not mean sub-prime companies, says the Treasury. This is not interfering with the market, it’s just incubating a new market.