The case for the prosecution is clear. The demise of Northern Rock is a colossal embarrassment. It should not have been allowed to occur. More shameful still, it has taken four months to get nowhere, from the first public intervention by the Bank of England.

Indecision still defines the response of government and regulators. The costs are enormous. They come under three headings. First, Britain's reputation as a financial centre has been profoundly compromised. London is one of the world's pre-eminent financial capitals. Britain is the only leading commercial standard bearer to find itself grappling with the the collapse and possible insolvency of a high street bank.

Gordon Brown and Alistair Darling shoulder the second set of costs. New Labour has built its credibility on economic competence. It has won three general elections because it has convinced voters that their livelihoods are safe in new Labour hands. Our most senior politicians are damaged by the mess, and we are all impoverished because the Prime Minister, and the Chancellor of the Exchequer, are squandering hard-earned respect. Thirdly, there are cash costs. We, the people, have lent Northern Rock £26 billion, or £430 for each British man, woman and child. We have given guarantees to innocent depositors of Northern Rock to the tune of an additional £29billion, or another £470. Taxpayers are supporting Northern Rock with a notional £1,800 per head.

The £55 billion total, half borrowed by Northern Rock from the Bank of England and half derived from guarantees, is about the same as the yearly sums paid in corporation tax and twice the total council tax bill. The national Budget, to be detailed by Mr Darling in March, could bear some nasty bruises.

The financial costs may not be as bad as this sounds. Most of the loans may well be paid back in full. The guarantees will probably go unused. Day-to-day crisis management costs will soak up tens, perhaps hundreds, of millions of pounds. But not billions. And if all else fails, the Government has security in the houses bought with money lent initially by Northern Rock. If the housing market slumps, the costs will grow. Yet taxpayers could profit also from the arrangement if house prices skip past the current uncertainty and continue to rise at the pace witnessed in recent years.

Nonetheless, this is turning into a saga of mismanagement. The list of people to be indicted for the failure of Northern Rock, and the ineptitude of its rescue, is long. Adam Applegarth, the former chief executive of the Newcastle lender, is the chief culprit. He and his team of top managers ran Northern Rock into the ground. They used methods that were foolish and risky. Northern Rock managers borrowed too much from the financial markets, and lent too much to loan-hungry homebuyers. Northern Rock was left disastrously exposed to the danger that materialised in August when the world's financial system hit the buffers. Banks should manage risk. Mr Applegarth and the other Northern Rock managers put far too many eggs in one, wholesale money-market, basket.

The board, led until October by the ineffectual Matt Ridley, the former non-executive chairman, should have obliged Mr Applegarth to adhere to tried and tested banking practices. The Financial Services Authority, the City watchdog, was wrong to supervise Northern Rock as lightly as it did. The dangers posed by a run on a bank meant that the FSA should have ensured that Northern Rock could cope with all possible threats. Mervyn King, the Governor of the Bank of England, did not communicate effectively with the FSA, and the Treasury. More should have been done to help Lloyds TSB, and other banks willing to rescue Northern Rock just before the crisis became public. It is simply not good enough that Britain's half-cocked depositor-protection scheme went unreformed. The tripartite regulatory arrangement, in which the Bank, the FSA and the Treasury were meant to co-ordinate cover, was found wanting.

Investment bank advisers, including Goldman Sachs, should ask themselves whether they have done enough to assist swift decision making. Activist shareholders in Northern Rock, especially those such as RAB and SRM that bought in after disaster struck, made life more complicated and, rightly, are being largely ignored.

The Government of Mr Brown and Mr Darling is dithering. Once Northern Rock foundered the Government should have orchestrated quick and viable resolution. The problem of Northern Rock appears intractably difficult. In reality it is disarmingly simple. Northern Rock ran out of ready cash. The Government, fearing that a run on the bank would destabilise the whole financial system, stepped in with a bridging loan. That bridging loan needs to be repaid. Nationalisation always looked like a possibility. Not 1970s-style state ownership, though. The State needs to take ownership only to assure the people that they will not lose the money lent to Northern Rock, and that they will not be called on to stand by guarantees.

This nationalisation may mean the dismemberment of Northern Rock. It may mean that shares in the company have little or no value. But decisive action is required. For too long, government and regulators have waited for what might be described as a Paul Daniels and Debbie McGee “Magic Moment”. In one big puff of smoke, they hoped, the Northern Rock problem would go away and a private sector solution would miraculously appear. The policy fed a festival of procrastination. The public now face nationalisation by indecision. We, the people, may end up owning Northern Rock not as a result of a decision, but by default.