The dilemma for Mr Darling

The depositors' response may be irrational but it is certainly understandable. They may know that the Bank of England is underwriting their money, but they fear that if Northern Rock does collapse, getting access to their funds may be time-consuming and bureaucratic. The question is whether the worry and insecurity is contagious, whether others in the banking sector will be undermined by the prevalent crisis of confidence. What the Chancellor was trying to do with his action was to save Northern Rock and prevent a domino effect on other institutions, such as the Alliance and Leicester and Bradford and Bingley, whereby the nation's savers put their cash under the nation's mattresses.

Those other banks don't have the same degree of exposure to the febrile and unstable interbank loans market as Northern Rock. Only a quarter of the money it lent to mortgage-holders was derived from actual deposits - though, as we see, that still amounts to a great many people - and threequarters was from the money market. This was a real risk, probably greater than that taken by other banks and former building societies.

Were Northern Rock's depositors at fault in failing to identify the inherent instability in their bank's credit structure? No. Frankly, few laypeople - and indeed not many experts - are in a position to scrutinise a bank or building society's structure to that extent. Few saw this credit squeeze coming. But plainly the bank's senior managers and non-executive directors were at fault in the extent of risk they were taking. They did very nicely out of it for a good five years - now they have found out that the markets were not guaranteed to float indefinitely. As Mr Darling has made clear, the bank's senior managers must now pay the price.

Indeed, the crucial element in all this is that both the Financial Services Authority and the Bank of England had been going out of their way, long before this US-led credit crisis, to warn the financial-services industry that the credit market was unstable and that banks were overstretching themselves. And if institutions will not listen to the Bank's Governor or to the FSA when they fulfil their function then they cannot avoid responsibility for the consequences.

But if the action of the Chancellor and the Governor of the Bank of England is sufficient to prevent the crisis spreading the political fallout for the Government will be more lasting. There is substance in the Tory charge that the present economic boom is grounded on debt, state as well as individual. It is symptomatic of a cavalier attitude to borrowing. Attempts by ministers to suggest that the Tory government in 1997 had greater levels of debt than the present government is simply false - though it may have done in 1992 during the crisis of the ERM (which Gordon Brown supported). Northern Rock's difficulties may derive from the collapse in the US sub-prime market but the far larger problem is the wider crisis of public faith in the financial management of institutions and government. The air is thick with recrimination.