Not only have the financial regulators failed, there are also failures of other institutions. Credit rating agencies failed to downgrade banks holding toxic loans. Company accounts are supposed to alert markets and regulators, but failed to alert anyone. Company auditors collected huge fees, but their audit reports turned out to be worthless. Consider four examples.

Northern Rock received a clean bill of health from its auditors on its 2006 accounts. The auditing firm also acted as a consultant to the bank and received £700,000 for the non-audit work. The fee dependence is always likely to dull any sense of inquisitiveness.

On January 25 2008, Bear Stearns, America’s fifth largest bank, received a clean bill of health from auditors on the financial statements for the year to November 30 2007. Yet Bear Stearns could not sustain its financial position and, on March 17, it was sold to JP Morgan Chase for $2 (£1) a share, valuing it at £118 million. Just 16 days earlier, it was valued at £30 billion. Under pressure from major investors, the offer was raised to $10 a share.

On February 27 2008, Carlyle Capital Corporation, an £11-billion hedge fund registered in Guernsey, received a clean bill of health from auditors on its financial statements for the year to December 31 2007. The accounts stated that the directors were satisfied the group has adequate resources to continue to operate as a going concern for the foreseeable future. Two weeks later, Carlyle collapsed, as it could not reach financing agreements with its key creditors.

On February 27 2008, Thornburg Mortgage, America’s second-largest independent mortgage provider, published its audited accounts for the year to December 31 2007. These accounts carried a clean bill of health from auditors. Six days later, the company explained that it was renegotiating its financial position. The auditors retracted their opinion.