Jeremy Warner: Whistleblower claims Crosby's head

Outlook There's not much Gordon Brown, the Prime Minister, can salvage from the James Crosby affair, but he should perhaps be thankful for small mercies. This time last year, it was looking all too possible that Sir James would become the next chairman of the Financial Services Authority. Indeed, the job would have been his had he said he wanted it. Think how much more incendiary Paul Moore's allegations of recklessness would have been had Sir James actually been the head of the financial regulator, and now in charge of regulatory reform, rather than just its deputy chairman.

Well now he's gone, another scalp of sorts, and sweet revenge for Mr Moore, who was fired by Sir James after warning about overly aggressive sales practices and expansion of the balance sheet.

It now emerges that there was in fact a history of regulatory concern about HBOS which both pre- and post-dates Mr Moore's complaints. The FSA was on the case. Indeed, it's privately expressed strictures appear to have led directly to belated abandonment of the share buyback programme, a deliberate reining in of mortgage sales, and steps to lengthen the maturity profile of its wholesale funding. Too little, too late, I'm afraid.

I've always felt a little sorry for Andy Hornby, the man who succeeded Sir James. He's had much of the blame for the demise of HBOS, but in fact he had been CEO for rather less than a year by the time the credit crunch hit, and as a non-banker by background, he was never the right man for the job anyway.

The main architect of HBOS's misfortune, if there is such a person, was Sir James, whose determination to make his charge into one of the big five high-street banks was with the benefit of hindsight an exceptionally high-risk strategy. Yet it is all very well saying this after the event and hanging these people out to dry. The fact of the matter is everyone is culpable in this crisis, from Gordon Brown to the Bank of England, the FSA and you and me.

Stephen Hester, the new chief executive of Royal Bank of Scotland, put it best yesterday when he told the Commons Treasury Select Committee there was nothing untransparent about what was going on. The growth in leverage, the hell-for-leather expansion of bank balance sheets, the share buybacks, the demand for "efficient" use of capital (which meant running banks on as little of it as possible), it was all there for everyone to see. But collectively we got sucked into the zeitgeist of the time, and allowed our better judgement, natural sense of caution and instinctive knowledge that there is no such thing as a free lunch to become suspended.

Sir James and other senior banking executives had a higher responsibility than us debt-fuelled consumers, of course, but the pressure on these guys from the City and the body politic to perform, meet their targets, earn their bonuses and pay big fat tax and dividend cheques was immense. They soon would have been ousted, like the unfortunate Mr Moore, had they they adopted a more cautious, prudential approach.

The tragedy of it is that the now all-embracing backlash will mean the death of risk-taking for years and possibly decades to come. Economies that regulate out all risk-taking tend not to be terribly dynamic.