LYNNE FEATHERSTONE: Villains of the billion-dollar crash

Hey diddle, diddle - and we're the mugs who got diddled! As one financial institution after another crashes into trouble, will it be just Northern Rock the taxpayer has to bail out, or will be end up picking up the pieces for even more blunders?

Between them HSBC, RBS, Barclays and HBOS (as was) have written off 52.9 billion US dollars - without any individuals being held responsible. Imagine the outrage there would be if the government had lost even a fraction of that amount of money.

At least we're not US taxpayers - who are going to have to foot the bill for bailing out a huge chunk of their financial system.

The "masters of the universe" turned out to be rather puny - not nearly as smart as they thought but - just to add a grating edge, leading their firms into disaster hasn't stopped them walking away with huge pay packets and pension pots, either in the US or in the UK.

When it comes to bombs or banks, governments always find the money to send in the troops or to bail out the banks. That's certainly not the story when it comes to public services like health, education or the police - or post offices for that matter!

The ability of a bank to come crashing down with wider consequences does make them a sort-of special case, but this knowledge that the taxpayer may have to bail them out should come with consequences: not just effective regulation, but also personal responsibility.

If you cause a firm to crash, why on earth should you still be picking up bonuses for your performance? That is an obscenity.

And lo and behold, Gordon was in full agreement with me about this last Sunday in his television interview with Andrew Marr. But outside of trying to gain 'brownie' points for being against obscene bonuses, he had no methodology to deal with them.

Also - 'scuse me - but wasn't he Chancellor for the last 10 years when he did absolutely nothing to stop the orgy of irresponsible borrowing, lending, cheap credit and obscene bonuses?

Much of the crisis management we've seen in the last few months has been about merging firms. Understandable in the circumstances - but is a financial system of fewer, bigger firms really going to be more resilient in the long run - and that's leaving aside the worry that fewer firms will means less competition, meaning even more banking rip-offs for you and I.

I fear that driven by the desperate need to keep things going now, we are going to end up with a financial system that can very easily fail again, because with a smaller number of larger firms, the fallout from one going wrong in the future will be much, much worse.

Strength in the financial system should come from diversity - we should have a large number of firms so that one mistake doesn't infect the whole system (and also so that most are small enough that those running them can't simply assume that if they get it wrong someone will bail them out).

It's not just nostalgic to think back warmly to the days of local banks and building societies - there is real merit in promoting diversity too.

But we should also turn our eyes to the auditing profession. Where have the auditors been?

We now know just how risky the financial plans were of many firms - but where were the warnings from the auditors about the assumptions that the businesses were staking their futures on?

There is a question about the relative roles of auditors and non-executive directors in supervising and highlighting risks - but between them they failed. Just as we are seeing major restructuring amongst firms, we should also see a major rethink amongst auditors.

If they fail to warn properly about the sort of financial risks we have seen come home to roost, are they really doing all that we should want auditors to do?

So all in all - it's us who are being diddled. At every turn our financial well-being has been last on everyone's list!

Lynne Featherstone is the Liberal Democrat MP for Hornsey & Wood Green