"Project Merlin" not so magic after all.

It seems that the government's attempts to get banks to start loaning money to small businesses has stalled.

Not a suprise.

Right now, thanks to all the repackaging of bad mortgage debt, the banks have an unknown amount of toxic assets on their hands. When anyone tells you they know exactly how much toxic debt the banks have on their books, just look at them and laugh. Because no-one knows exactly how much toxic debt there is in the system. Bad mortgages were repackaged so many times that its virtually impossible to unpick the whole thing.

So under those circumstances, its no wonder banks don't want to add more debt risk to their portfolios.

And the government can't force them to start lending money again. I mean, what if it all went pear-shaped, we'd have to bail them out again....