" the US plan the flavour of a $50 billion subsidy, and is almost fully government-reliant"

A very interesting post on Vox about the different approached between the U.S. and U.K. on guaranteeing loans by Viral Archarya and Raghu Sundaram. Please read it:

"The pooling outcome, in contrast, may keep the system reliant on government guarantees for a longer period since it does not facilitate a better pricing by banks and markets of individual banks’ credit risk. It effectively gets healthy banks to subsidise the borrowing of unhealthy ones and does not impair capital-raising ability of the latter. The US scheme is best characterised as a bailout that transfers taxpayer funds to the banking sector. "

In other words, the U.K. systems weeds out the poor banks, while the U.S. system keeps them afloat. I prefer the first in the short term, but there are reasons for backing the U.S. plan, for example, keeping more competition. However, I feel the really poorly functioning banks needed to be let go, including for the reason I call Bagehot's B of E point, don't reward poor decisions unduly.

Here's the difference:

The UK scheme has the flavour of a small tax, and is partly market-reliant; the US plan the flavour of a $50 billion subsidy, and is almost fully government-reliant. The UK scheme is likely to lead to a separating equilibrium, in which banks whose credit risk is lower than the market’s perceptions opt out. The US scheme will force a pooling outcome wherein all eligible banks – regardless of their health – participate because it is not possible to re-enter later. Which scheme works better depends upon the depth of the coming recession. The UK scheme assumes that following the recent capital infusions, even the unhealthy players are now solvent and are unlikely to fail. If the financial crisis worsens, this may prove incorrect.