Branson can never be the solution to this crisis

When we have had banking crises in the past there has always been someone on the regulatory side who did what they were supposed to do and did it well enough for people to be able to convince themselves without much difficulty that the resolution of the problem was in safe hands.

The unique aspect of the Northern Rock crisis is that no one has come out of it well, not Mervyn King, the Governor of the Bank of England, or his deputy, Sir John Gieve, not Sir Callum McCarthy at the Financial Services Authority or his chief executive, Hector Sants, and certainly not Chancellor of the Exchequer Alastair Darling, or his boss next door, Prime Minister Gordon Brown.

The legacy of recrimination, back biting and mistrust that has existed between the parties since has done nothing to persuade the City that the hoped for Northern Rock private-sector rescue is likely ever to get off the ground.

It was probably a mistake to set expectations so high in the first place because it was always going to be tough. The Bank of England has been forced to inject £30 billion of support, give or take a few pounds, not because Mervyn King thought this was a great money- making idea but because no commercial organisation was willing any longer to take the risk that Northern Rock was viable.

The Bank moved because it felt it had to try to protect depositors and the reputation of the British banking system, both of which would have suffered mightily from a sudden Northern Rock crash. But unfortunately, though the Newcastle bank has survived, thanks to this financial blood transfusion, it is effectively a zombie - neither dead nor properly alive. Experts predict it could take 20 years for the Bank of England to get all its money back, so painfully slow will its recovery be - and that is taking the optimistic view that it will indeed get it back at all.

The brutal truth behind the brave talk of private-sector rescues from Virgin's Sir Richard Branson or Luqman Arnold's Oliphant private-equity group is that neither can go ahead unless some other bank can be persuaded to share the Bank of England's burden.

It was suggested earlier that Royal Bank of Scotland, Citigoup and some others wanted to help but the fine words have not turned into hard cash and why should they? Why should any intelligent banker - possibly an oxymoron, admittedly - take on a risk like lending to Northern Rock when there are so many better prospects around where the interest earned would be as high and the prospect of getting the money back significantly better?

How can commercial bankers reconcile using other people's money to do a favour to the Bank of England, and indirectly to the Government, with their legal responsibility to look after their depositors' money prudently while also doing what is best for their own shareholders? Lending to Northern Rock fails both tests. They could find themselves sued by shareholders just for thinking about it.

It is the impossibility of overcoming this obstacle that persuaded many of us weeks ago that once the ritual dancing had been completed, nationalisation would emerge as the only possible option if the business were to survive long enough to be put back on its feet. No one wants it, but as the private-sector options founder for lack of cash they may well have no choice if total liquidation of Northern Rock is still not an acceptable political option.

The realisation that this is the way the cards are falling is enough to explain the increasingly obvious bad blood between the various parties. Thus the headlines over the weekend, which in effect positioned the Bank of England as complaining that the Government was so paralysed by a collapse in morale that it has become part of the problem, not the solution.

The Bank's complaint - if the story is true - is that the Government is dragging its feet over legislating to create a proper safety net for banking deposits, something King feels is essential if further mass withdrawals by depositors are to be prevented next time there is a crisis. But the Bank is on dangerous ground here and ought to be careful not to push this line too hard.

It can hardly be news that the Government is suffering from poor morale. More to the point, though, we need to recognise that one of the worst aspects of British public life is the propensity for Parliament to respond to every new problem by passing ill-thought-out laws designed to stop it happening again. We complain about the needless piling of regulation on regulation, then when something goes wrong demand ... more regulation. We ought really as a society to accept that accidents do happen and when they do to encourage ministers not to panic and to move, if at all, only after sober reflection - otherwise we will end up with another mess like a financial Dangerous Dogs Act.

It is also true that a demand for legislation is the Bank or England's stock response to every banking crisis. It demanded and got new laws after the fringe bank debacle of 1973, the Johnson Matthey bail-out of 1984, the BCCI collapse of 1990 and the Baring bankruptcy of 1995, and much good it has done them or us since. Banking accidents still happen. Better the Bank effectively enforce the powers it already has than demand new ones.

In the final analysis this may be just a petty squabble among people who have been working too hard and are frustrated by the lack of progress. But it is also possibly something deeper - a breakdown of trust between the participants and a lack of respect for each other's competence. This has the potential to be deeply corrosive and dangerous because it must distract the participants at a time when they need to be entirely focused and working together.

Important though Northern Rock is, it remains a sideshow in the context of the global banking crisis. The real threat to our economy is the very real possibility of a global recession arising out of that crisis. Staving it off will demand the highest degree of skill and cooperation from those in charge of the economy - and not a little luck. This is absolutely not the time for them to be distracted from the job in hand by petty squabbles and back biting.