The worries of the housing sector are starting to show overseas.  Today the Bank of England announced a package very similar to the Federal Reserve’s action to swap treasuries for mortgage debt.  The BoE acted to fund up to $100 Billion of government bonds for trade with mortgage backed securities.  This comes just weeks after Northern Rock was absorbed by the English government and the Federal Reserve’s actions for swap plan.

The Bank of England has been resetting rates alongside the Federal Reserve.  Since December, the Bank of England has lowered rates 3 times in an effort to spur borrowing and cut into liquidity problems that are plaguing banks and borrowers alike.  The Federal Reserve offered $200 Billion in guaranteed loans which is double the amount the BoE is currently offering, though there are many more houses and thus owners who are upside-down on loans in the US than in the UK.

This is comparatively good news for the United States.  As we’ve seen in recent weeks, the stock market has rallied on comparative news, that the market has gotten better though still doing worse than the long term average.  While we’re much better off now than in late 2007, many lenders are still writing off huge amounts of debt and assuming large losses.

It is hard to say how this will affect things in the UK.  The Pound has favored well against the other currencies, trading at nearly twice the value of the USD but losing much of its value to the Euro.  Investors who sought protection from a fallout in the US markets fled to Europe, many into the Eurozone and a few into the UK.  If housing problems persist in England, the chance of a drop in the value of the GBP becomes even more likely.

A quick fix of $100 Billion will help English lenders, but at the cost of inflation.  US consumers have already seen the cost of high inflation on the price of commodities such as food and oil but also on consumer goods which require more and more money to ship and produce.  The new funds will be made available to banks who want to temporarily “loan” the government their bad loans while using the new funds for further investment or to ease negative liquidity.