Darling: Floods of pay out on loans must cease to stem debt
Chancellor Alistair Darling has weighed in against the banks for providing free and easy credit for too long, a strategy now coming back to haunt them as liquidity dries to a trickle.
Speaking to the Daily Telegraph he suggested that the way forward could be a return to “good, old-fashioned banking”, which many interpreted as a call for tighter controls on who gets credit and much tougher lending criteria.
But he made it clear that it was not the job of this Government to enact legislation on the issue, placing the responsibility for acting responsibly firmly on individuals. “My starting point is that Government can’t stand on the shoes of borrowers and lenders.”
He continued: “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 need to think long and hard about this.”
He also warned against some of the highly exotic derivatives now used in the banking system to yield astronomical returns, like the bundles of debt (collaterised debt obligations, for example) currently under scrutiny with regard to US sub-prime mortgages. “When someone comes up with a fantastic way of making money, someone needs to ask ‘how is this money being made and what are the risks’?” he said.
I once met Alistair Darling at the House of Commons and he seemed a hospitable and amiable man. But as the scion of a Scottish establishment family he’s probably hazy on what it’s like to be middling – that is, not to be born to the finer things of life as of right. A prime reason for the irresponsible credit boom he so rightly deplores, however, is the smouldering desire in all of us to sample those things, a desire fanned by the credit providers into a conflagration that has reduced entire lives to smoke and ashes. Darling speaks about ‘responsibility’ but when you offer people luxuries they would never be able to attain by any other means than credit then responsibility, inevitably, is the first casualty of ‘More!’.