Northern Rock's nationalisation has prompted many to recall the politics of the 1970s. Yet, there is a salient difference. During that benighted decade, the Labour Government resisted the temptation to nationalise banks that appeared destined to collapse.

In 1974 Harold Wilson, the Prime Minister, inherited an economy moving decisively from boom to bust. The stock market teetered on the brink. And property prices, the one investment that appeared to be bankrolling everything else, suddenly took a nosedive.

Exposed by this sharp deterioration was a whole tranche of secondary banks that had fuelled the early 1970s rush of property speculation. The failure of one or two of them might have been a salutary lesson, avoiding creating a moral hazard. However, it soon became clear that it was not just the London and County Securities Group and Cedar Holdings that were imperilled. Scores of banks faced ruin.

How far this domino effect could stretch became a source of fevered conjecture. Some postulated that if left unchecked it could even bring down one or more of the “big four” clearing banks. Inaccurate rumours spread that the NatWest was rocking precariously.

Little sympathy could be expected from the incoming Labour administration. After all, it was less the unprofitable banks than the profitable ones that the party's left wing wanted nationalised. Even Wilson spoke of creating a state-owned merchant bank and condemned the stock market as a “casino” (this was before Labour came to see casinos as dynamic drivers of regional development).

Rather than wait for the new Government to pronounce, the clearing banks had already got together with the Bank of England. On the principle that a stitch in time saves nine, they organised a rescue package known as the “lifeboat”.

With the stock market collapsing (the value of the FT30 halved) and more and more stricken banks clambering aboard the lifeboat, the initial liquidity injection was clearly inadequate. But, after a further whip round, the mission proved ultimately successful.

The lifeboat saved more than 30 banks from collapse, without a single ordinary depositor losing any money and without the contagion spreading to the big four banks. Many of the troubled banks were successfully restructured and amalgamated. The reputation for crisis management of the Bank of England soared.

Indeed, it may be that success which helps to explain why relatively few recall the “1974 secondary banking crisis” today. How Alistair Darling must hope that his actions over Northern Rock may similarly become a footnote in financial history tomes.

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