INSTANT VIEW-Second bank rescue plan launched

LONDON (Reuters) - Following are reactions to the government's second bank bailout.

ALAN BROUP, GROUP CIO, SCHRODERS

"It clearly is vital to get credit flowing again. There is of course an awful irony in the fact that banks are being pilloried for irresponsible lending in the past and now in the face of arguably the worst recession since the second World War they are being encouraged to up their lending.

"Nevertheless, I think one understands the position and the path of going down some kind of a guaranteed route does seem to be a sensible one but then as always the devil is in the detail."

KEITH BOWMAN, EQUITY ANALYST, HARGREAVES LANSDOWN

"Despite all the "back slapping' which the original UK bank bail out brought, the government appears to be conceding that the sector remains in a critical state.

"However, whilst today's measures will be widely welcomed, significant risks remain. The plan cannot compensate for the withdrawal of foreign banks from the UK, whilst the fear that asset prices will continue to decline, leaves the banks looking to cherry pick the safest lending opportunities.

"All in all, should these measures fail, a further ratcheting-up of bank sector nationalisation in order to force lending would appear to be the next step, a conclusion seen beyond all possibility just 12 months ago."

PRIME MINISTER GORDON BROWN

"The scheme is temporary, based on loans rather than grants, is backed by assets and can be capped if necessary."

SIMON WARD, CHIEF ECONOMIST, NEW STAR ASSET MANAGEMENT

"The scheme itself sounds like a step forward but there aren't a lot of details on the terms and the fees. The UK authorities have tended to apply quite penal terms and fees on their previous support measures compared with other countries, which has somewhat reduced their effectiveness, so that's a possible concern.

"I think the most interesting feature is the Bank of England's asset purchase facility, which provides scope for the Bank to provide credit directly, so it can have an immediate and pretty significant impact. That's the most positive aspect of the plan.

"The insurance scheme is basically an alternative to setting up a bad bank. They have preferred to go down this route because the government doesn't have to stump up any cash."

ROBERT TALBUT, CIO, ROYAL LONDON ASSET MANAGEMENT

"It's a very positive step, and it should be helpful in easing conditions. It is helpful in the way that the FSA is providing some clarity about their capital requirements. And it's an important step that they have implied that the Bank of England can start along the road to quantitative easing.

"But my personal view is that it does fall short of what I think is the ultimate solution, which would be the creation of a bad bank. It's clearly something that they have looked at, but bad bank creation is quite complicated. It's not necessarily been ruled out, but the measures that are out today were easier to bring to market much quicker."

BRUCE PACKARD, BANKING ANALYST, EVOLUTION SECURITIES

"Following various announcements we could see a bounce this morning, in all the banks ex RBS, because the rest of the sector is not being forced to recapitalise, and therefore there is no further dilution to equity shareholders. Fundamentally though we would steer clear and concentrate on sectors which can be analysed rationally.

"We expect the UK Govt to try to solve the obesity crisis next week, by nationalising the supermarkets, so that they can then resume the supply of cheap doughnuts to fat people."

ROSS WALKER, ECONOMIST, RBS

"Overall, this (the asset purchase scheme) marks a radical, though widely expected/trailed, development in monetary policy. This is welcome as the MPC (Monetary Policy Committee) now has policy tools beyond Bank Rate.

"Outright purchases of these assets by the Bank obviously leaves taxpayers shouldering significant credit risk, but there is little alternative -- the risks/cost would be far greater if an absence of credit triggered a more protracted recession."

ALAN CLARKE, UK ECONOMIST, BNP PARIBAS

"It (the asset purchase scheme) sounds very much like quantitative easing and looks similar to the Fed's scheme. The government is giving the Bank of England an additional policy tool."

NOTE TO CLIENTS FROM EQUINET ANALYSTS

"We think it is possible that other European countries will follow this example. At first glance such a solution looks attractive for Germany as well."

BANK OF ENGLAND GOVERNOR MERVYN KING

"The Asset Purchase Facility will provide an important additional tool to improve financing conditions in the economy."