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Dunfermline Building Society rescued by government

The UK government was today forced to bail out the Dunfermline Building Society with a £70 million hit for the UK taxpayer. There have been rumours for some days that the building society had hit trouble with losses of over £26 million from alleged risky lending in the commercial sector and sub-prime loan market. The society itself has 250,000 savers and 35,000 borrowers although the UK government has guaranteed all cash deposits.

The Treasury has been working around the clock to persuade others in the building society sector to stump up the £70 million required to keep the business going, but to no avail. As we suggested a few days ago when we covered the subject, the situation seems to be very unique to the Dunfermline Building Society and while there will be concern in the sector it is unlikely to have a significant short, medium or long term effect. This is however the first building society to go under as a consequence of the ongoing recession and sees yet more money stumped up by the UK taxpayer.

The government is allegedly trying to find a longer term partner, even though £70 billion has been invested in the business, and we will report on developments in the future.

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