Alistair Darling, the Chancellor, today launches an attack on banks for lending too freely and allowing consumer debt to spiral to record levels, The Daily Telegraph reports.
Alistair Darling says the key is to make the system ‘more open and transparent’. People should consider the consequences more carefully before signing up to loan deals, he says.
His remarks will be seen as a watershed, marking the end of the credit boom that has characterised most of Labour's decade in office.
Mr Darling says: "They [borrowers] need to ask themselves, 'can I repay this?' and lenders need to ask themselves, 'If it goes wrong can I get it back?'
"People do need to think long and hard about this. One of the by-products of the current situation is that, not just at a high level but right across the piece, people will be a bit more cautious."
THE BANK OF England's Governor spelt out the reasons for his hardline stance on the liquidity crisis yesterday, saying that unless the economy was in danger an injection of funds to encourage banks to lend to each other would reward reckless behaviour, according to The Independent.
Mervyn King said the closure of the money markets was the result of the mis-pricing of risk in the financial system rather than the state of the economy, though he warned that the supply of credit to households and businesses may tighten and borrowing costs would rise.
Only if the effect on the wider economy was severe enough would the Bank inject extra liquidity to ensure the financial system operates effectively, he said. If the Bank acted without a clear threat to the economy, it would be providing after-the-event insurance for risky behaviour.
THE US WILL pay an economic penalty for the financial turmoil of the past few weeks but growth will continue to be healthy and there is no prospect of an early recession, Henry Paulson, the US Treasury Secretary, told The Times yesterday.
Mr Paulson said it would take some time before financial markets fully recovered from the turmoil of the summer but insisted that the US expansion, which is almost six years old, would continue in any case.
“There will be a penalty but the backdrop of the strength of the economy, the corporations, the institutions, is such that that we are resilient,” Mr Paulson said.
To comment on this story, contact:
0207 034 2681
Reduces chances of rate hike
'Following the letter, but not the spirit, of the rules'
70 Accredited firms in UK
Faster, cheaper, better?