Banking regulation has failed in UK!

It looks like banking regulation has failed in the UK with Northern Rock (NRK.L)
hitting the rocks. It looks like Bank of England governor Mervyn King has not
played his hand very well. He is looking isolated but he had problems with the
tripartite regulation of the Treasury, the FSA (which monitors banks) and the
Bank of England, which spends its time spouting on about inflation (CPI or RPI
anyone). Gordon Brown was responsible both for the tripartite regulation framework
and the adoption of the CPI, which excludes interesting things like mortgage
costs.
I think Mervyn is an Aston Villa fan, which makes him a romantic. In an imaginary
world one could make the case for letting banks fail to punish them for
irresponsible lending but practising the theory does not make a lot of sense.
The Europeans and Yanks must be laughing their heads off. They can't wait
for Gordon's next lecture on economic stability.