By Simon Miller
The governor of the Bank of England has attacked banks and the former Labour government at a Treasury select committee.
The extraordinary attack came after Labour MP Andrew Large accused Sir Mervyn King of being relaxed and complacent over the economy.
After saying he was "far from relaxed or complacent", King added: "I am actually rather concerned about it. I want to see something that makes sense economically, not something which is just a gesture."
He added: "I’ve consistently and publicly been dissatisfied with what has been done. I said to the previous government that the scale of the recapitalisation of the banks was inadequate and their actions in making sure banks lend to SMEs was also inadequate. I made that very clear."
The governor continued: "They negotiated with the banks, and if the banks didn’t like it, that was what came out. That doesn’t seem to be a very strong public policy."
King then turned his fire on banks stating they would leave the taxpayer with bad small-to-medium business loans.
"And I’ll tell you why. Because in discussing with the present Government a scheme to lend to SMEs, the banks were unhappy about the idea of a scheme in which the Government would participate in all SME lending," he said.
King added: "Why? Because they didn’t want to share the fruits of the most profitable loans to small businesses. [The Taxpayer] end up being left with the bad ones. That’s why we’ve [the Bank] been very clear on this with Government."