Perhaps the most fundamental confusion in the evolution of financial services regulation is the equation of financial stability with the survival of established institutions. If I had £1m for every time I have heard a possible reform opposed because “it wouldn’t have prevented Northern Rock or Lehman Brothers going bust”, I might now have enough money to bail out a bank.
The objective of reform is not to prevent Northern Rock or Lehman going bust. It is highly desirable that organisations such as Northern Rock or Lehman should go bust.
Northern Rock had overambitious expansion plans and a business strategy that proved flawed (although many people thought at the time, with reason, that reliance on wholesale funding was a strength rather than a weakness).