The Lib Dems have blamed Gordon Brown for failing to stop the "reckless" lending which they say led to the near collapse of Northern Rock.
Northern Rock customers have been told not to panic
Treasury spokesman Vincent Cable called it a product of executive "greed", lax regulation and government complacency.
Mr Cable said he warned Mr Brown about a looming debt crisis "four years ago".
The Tories say the government is presiding over "a mountain of debt" but Chancellor Alistair Darling says the UK economy remains strong.
Speaking at the Lib Dem conference in Brighton, Mr Cable said: "The British economy may have been reasonably successful but it is also highly fallible.
"The house that Gordon built may not be built on sand but it has certainly been built on a floodplain.
"It has yet to be fully tested against rising economic sea levels, though the events of the last week suggest that it may be very soon."
He added: "This current boom does not depend on long term investment or on exports or on the cultivation of a more educated, skilled, labour force.
"It is powered by debt financed consumer spending, some reckless lending and the optimism generated by a house price boom.
"The water is now pouring through the defences after the near collapse of Northern Rock; a product of greed and reckless gambling by overpaid executives; lax, indulgent bank regulation; and a complacent government. I warned Gordon Brown of a looming debt crisis four years ago."
Conservative leader David Cameron said the immediate priority must be "to reassure people about the situation and the safety of their deposits"
He stopped short of calling for a recall of Parliament, which he said would "only add to a sense of alarm".
But he argued: "This government has presided over a huge expansion of public and private debt without showing awareness of the risks involved.
"Under Labour our economic growth has been built on a mountain of debt."
Following a third day of lengthy queues outside Northern Rock branches across the country and plummeting share prices, Alistair Darling pledged to guarantee all deposits held by the bank.
Under the measures unveiled on Monday, the chancellor said Northern Rock savers would not lose a penny, regardless of how much they had deposited.
People could continue to take money out of the bank, but if they chose to leave it there it would be secure, he added.
Earlier, he admitted it had been clear since August there was a worldwide credit crisis which originated in the US and was affecting banks across Europe.
The shadow chief secretary to the treasury, Phillip Hammond, told BBC2's Newsnight Mr Darling's decision was the right move to reassure savers.
"There's an awful lot of people out there, very worried about their life savings. And the key thing now is to contain this crisis, to restore confidence and calm to the markets."
Once that has been done, answers to the hard questions about what happened in the run up to the crisis would be needed, he said.
The BBC's political editor Nick Robinson described the chancellor's money-back guarantee as an "extraordinary step" with "huge stakes".
"The reputation of New Labour was built on their reputation for economic competence and economic stability. No-one can say it's been stable in recent days," he said.
Alistair Darling and Gordon Brown would, he said, be spending Monday evening wondering whether that reputation was now under threat.
In his speech, Mr Cable also accused Mr Brown, the former chancellor, of presiding over a widening wealth gap between the rich and poor.
With hundreds of people facing insolvency and 75 family homes repossessed every day, "Gordon Brown must take personal responsibility" for the failures.
He had failed to tackle the banks over "debt promotion, unfair charges and irresponsible lending".
But the "day of reckoning cannot be far off".
Mr Cable also launched an attack on the "super-rich," following party leader Sir Menzies Campbell's pledge to "hammer" those at the very top of the income scale.
Research carried out for the party indicates that 84% of the public believe the earnings gap between rich and poor is too large - with the figure rising to 92% among Lib Dem and Labour voters.
Some 72% think wealth inequalities have grown worse under Gordon Brown's stewardship of the economy, while two thirds want the richest to pay more tax, according to the party's poll.