From Robert Peston’s blog.

The National Audit Office’s report into the events leading up to the nationalisation of Northern Rock can be captured in three simple points, none of which will surprise you:

Northern Rock branch1) In 2004 and subsequently, the Treasury – under the then Chancellor, Gordon Brown – didn't appreciate that banks were taking on dangerous risks by becoming dependent for funds on wholesale markets, and didn’t see the urgency of making adequate preparations for the possible collapse of those banks (even though it recognised that it didn’t have an adequate system for dealing with such crises);

2) In the autumn of 2007, the Treasury – under the current Chancellor, Alistair Darling – didn’t expect house prices to fall by more than a few percentage points and didn’t believe the UK would suffer a recession;

3) Until far too late, all the authorities – the Treasury and the Financial Services Authority in particular – had a hopelessly naïve view that Northern Rock was not taking excessive risks by providing 100% mortgages at the top of the housing market.