Is Treasury to blame?

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TREASURY
Is it to blame?
The key criticism is that the Treasury has been too hands-off in regulating banks and too slow to act once the crisis hit. Gordon Brown and Alistair Darling allowed companies including Northern Rock to fund aggressive expansion by flouting the traditional rules of mortgage lending. And they should have realised that any bank which used the money markets so heavily was going to be vulnerable to a "credit crunch". Critics say the Government should have either regulated or used political pressure to rein in Northern Rock and its ilk rather than allow the economy to boom on a mountain of debt. The other charge against the Treasury is that its decision to approve an emergency loan last week created a sense of panic.

Its defence
The Treasury insists it has run the economy successfully for more than a decade, enabling the public to benefit from steady growth and rising incomes. It also argues that the turmoil will not derail the country's long term prosperity and that excessive regulation would damage economic growth and harm the City.

BANK OF ENGLAND
Is it to blame?
The Bank is responsible for ensuring the financial stability of the economy and for spotting and countering any storms that might lie ahead. Critics claim it acted too slowly and then caused panic by giving a highly publicised emergency loan. The people in the spotlight are the Bank's Governor Mervyn King; the Deputy Governor Sir John Gieve - formerly a Home Office permanent secretary who couldn't get its accounts signed off; and Nigel Jenkinson, an executive director of the Bank. The trio should have spotted the looming "credit crunch" months ago and been ready to bail out Northern Rock with an alternative special lending facility. And it should have followed the European Central Bank and the US Federal Reserve by injecting larger sums than it did into the financial markets to prevent institutions such as Northern Rock running short of funds.

Its defence
Northern Rock is a flawed institution. Had the Bank acted differently, the problem would have been concealed and potentially led to far more serious, and costly, trouble ahead.

FSA
Is it to blame?The FSA is directly charged with regulating the banks and other City institutions. Under chairman Sir Callum McCarthy it has adopted an excessively "light touch" approach to regulation, ignoring risky tactics used by banks such as Northern Rock. Another charge is that the FSA, whose senior members include the former Food Standards Agency head Deirdre Hutton and the Bank of England's Sir John Gieve, has not calmed the panic in the wake of the Northern Rock debacle by spelling out why the public should not over-react.

Its defence
The FSA says it is confident Northern Rock remains solvent and that it would not have approved the bail-out if the company was fundamentally flawed. By avoiding overzealous regulation, it played a key part in last decade's City boom. Today its chairman said the system 'was working' and blamed '
irrational' savers for continuing to queue. Insiders say it has kept to its central brief and not been blown off course by the crisis.