Australia on Friday came to the aid of second-tier banks and non-bank lenders by offering to buy residential- mortgage-backed securities worth 4 billion Australian dollars
(3.3 billion US dollars).
The mortgage market has been in the doldrums because of the global credit crisis, sparking fears that non-bank lenders will go bankrupt.
The Big Four high street banks don't have the same problems as their smaller rivals or the non-bank lenders because they raise their capital from customers' accounts rather than having to rely on the international credit market.
"This is a temporary initiative that responds to highly unusual conditions in international capital markets and in particular Australia's mortgage lending market," Treasurer Wayne Swan said. "Boosting competition is something the government has been very emphatic about."
He said the purchases would exchange "cash on the government's balance sheet for new prime triple-A-rated securities."
The securities would be held until the market was more liquid and they could be sold. "We will own mortgages and they will give a return to the taxpayer," he said.
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