David Cameron writes in the FT:
This financial crisis is a challenge for our political system. Political parties and the independent financial authorities must show the character and judgment necessary to make the right decisions under pressure. Our response will have profound implications for the future prosperity of the country.
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Once liquidity is restored we need temporary action to tackle the failure of illiquid markets to value asset quality. In the current crisis mark-to-market accounting is exacerbating a self-fulfilling cycle of falling asset values and restricted lending. Regulators should work with their European counterparts to address this difficult issue.
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If liquidity and degraded asset quality are the short-term challenges, the ultimate cause of the crisis is excessive debt and a poorly capitalised banking system. The current ad hoc approach is running out of road. We need to rebuild strong banks that can play their proper role of supplying credit to companies and individuals
