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The spectacular collapse of Bradford & Bingley has brought home yet again the extent of the crisis in banking and the toxic nature of some of the new investment vehicles along with sub-prime and self-cert mortgages.

But in the sudden panic to fix the system, there is a real danger that the baby will be thrown out with the bathwater.

Bradford & Bingley might have done a number of things wrong in the way it has re-positioned itself in the market place going for the high-yield buy-to-let market while neglecting the less attractive prime, or conventional residential, borrowers.

It might even have taken a wrong turn when in the post-Rodriguez frenzy, it changed its business model from being the UK’s leading IFA firm to being a mortgage bank.

Even more, Steven Crawshaw might have been the wrong man, in the wrong place, at the wrong time.

But none of this could have prepared us for the weekend's events when the news was broken that Bradford & Bingley was to be nationalised.

Of course, a lot of this had to do with events in the US, including the near panic-stricken address to the nation made by a near-hysterical President Bush, using the language of fear to terrorise Congress - and through that the nation - in to believing that if the Hank Paulson $700bn bailout did not go through by Friday civilisation as we know it would collapse. We now know that was a cry of wolf.

But shouting fire in a crowded cinema when there is none can sometimes lead to a dangerous stampede. And, in the current financial climate, the mere threat of so-called systemic risk is the equivalent of the old mystic warning us of the wages of sin.

Bradford & Bingley had a cashflow problem, even if it was well capitalised - the same problem that the out-of-control Northern Rock experienced. However, a year after Northern Rock regulators are still in a trance as to what to do in such eventualities.

Bankrupting perfectly solvent banks in order to avoid the baying mobs may be good politics, but it is bad regulation