The government's proposal to buy up shares in banks appears to have met with negative market sentiment.
The FTSE 100 plunged again this morning, despite the government's announcement of its rescue plan.
Chancellor of the exchequer Alistair Darling said this morning that public money would be used to buy up shares in major UK financial firms. In turn, it has been suggested, this would boost confidence in the banking system due to the firms' balance sheets being partially underwritten by the taxpayer.
Currently, bank shares have plunged due to concerns over their financial stability. This is because the "money markets", the credit systems through which banks lend and borrow from each other, have almost entirely seized up in the credit crunch - depriving the firms of one of their primary sources of revenue.
However, the government plan appears to have met with negative market sentiment, with the FTSE dropping to under 4300 in early trading, before rebounding slightly.
Speaking to the Press Association CMC Markets dealer Matt Buckland did not expect the UK banking rescue plan to buck the market gloom, saying: "For the time being, it looks as if the impact is going to be minimal.
"As we've seen in the US, government intervention isn't freeing up credit markets and that is the key point - if it's difficult for companies and individuals to get hold of credit, it's going to be difficult to stimulate growth and break out of this recessionary mindset."
Following a minor rebound from its morning low, the FTSE was trading around four percent down as of 10:15 BST.
