The government is in for a seriously rough ride for nationalising Northern Rock. Howls from Northern Rock’s shareholders, the public finance implications, the inglorious history of UK state ownership – all will cast their shadow over this painful step. But it was, in the end, the right thing to do. Had Northern Rock stayed in private hands, taxpayers might not have captured the full upside that would compensate them for the subsidy Northern Rock in effect receives through cheap loans.

There are risks to this extraordinary move. What the government hopes is a “temporary” home under state ownership could end up being Northern Rock’s final resting place. Shrinking a financial business back to health is tough and Northern Rock’s asset base will probably be reduced dramatically. In the meantime, deposits have to not only stabilise. They have to grow again, so that Northern Rock becomes less dependent on wholesale funding, the model that got it into its black hole. Even today the bank’s assets probably yield less than the true market cost to fund them.