Liberal Democrats leader Nick Clegg says the Bank of England and Treasury must act decisively to head off a recession.
He says a combination of stricter lending and rising mortgage rates poses a serious risk of a house price collapse and the City of London is seeing not only speculation about the viability of some financial institutions but genuine concerns based upon an unprecedented breakdown of the money and credit markets.
Clegg says: “The Government and the Bank of England must stop dithering, and follow the decisive lead set by the authorities in the United States. In particular, the Bank of England must inject more cash into the UK money markets to restore stability and to stop interest rates for mortgage holders and businesses from being driven upwards. The Bank must also consider providing money to new players in the financial markets – secured against appropriate assets.
“The Bank and Treasury need to restore confidence in the banking system by undertaking to act swiftly to prevent any major bank failure – using the model of the rescue operation on Bear Stearns in the US. This includes using the backing of public money if this is necessary to restore stability.
“The Treasury should also be urgently making preparations to avoid mass home repossessions – using the same options which are now being considered actively in the United States. Extreme times require extreme action, and there is no doubt that our economy is now in real danger. There now needs to be decisive action to stop the problems in the City from wrecking the rest of the economy.”