Bank draws up plan to relieve loans crisis

An intervention aimed at breaking the credit log-jam by allowing banks to swap their mortgage-based assets for government bonds is being drawn up by the Bank of England.

The Treasury is set to give the go-ahead for the move, which may provoke similar criticisms to that over Northern Rock. However, Government sources said last night that the deal was not a "bailout" and that tax-payers would be protected.

The announcement came after Gordon Brown met Wall Street bankers on a US visit yesterday, ahead of talks with Ben Bernanke, the chairman of the US Federal Reserve, in Washington today.

"We are looking at how money can get... to those groups of people who have been denied the chance of mortgages," said Mr Brown. The pledge follows crisis moves by some lenders to scrap low interest-rate packages and mortgage loans to buyers with small deposits.