Leading article: Bad debts and bad decisions

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When surveying Wall Street, the phrase "Rewards for failure" is one that comes inescapably to mind. Chuck Prince, former boss of Citigroup and, thus the world's leading banker, has walked away from his job having overseen further losses of between $8bn (£4bn) and $11bn, on top of the $6.5bn already revealed. Citigroup's total exposure to the American "sub- prime" mortgage market – home loans for people with poor credit histories and scant means – is reported to be $55bn.

Given that the early estimates of the global total of losses to financial institutions from sub-prime amounted to some $200bn, that either means Citigroup has amassed more than its fair share of dodgy loans, or that the fall-out from the sub-prime crisis will turn out to be greater than feared. Either way, Mr Prince will be able to reflect on all that while resting on a pillow stuffed with a possible $90m of Citigroup share options.

Mr Prince's departure follows that of the boss of Merrill Lynch. Stan O'Neal resigned after admitting his firm would suffer a $7.9bn hit because of bad bets on mortgage-related securities (sub-prime again). For his pains, he received a $161.5m parting gift. The head of UBS, which has taken a $3.4bn knock, on the other hand, is still in post..

The rest of us may be able to stomach the combination of greed and stupidity exhibited by Wall Street's finest were it not for the fact that there is probably worse to come, and that their strategic errors will cost every homeowner, pensioner and investor dear. It is, for example, difficult to believe that Northern Rock will turn out to be the only British institution to find itself in trouble.

The Chancellor, Alistair Darling, is right to say that "we are experiencing an unparalleled period of financial uncertainty" but wrong to blame the phenomenon on the depressed US housing market, as if our own bankers, regulators and ministers were, helpless victims of unforeseen events.

They knew what was happening; some, in the Bank of England and elsewhere, issued public warnings about the global ballooning of debt, the riskiness and opacity of complex financial instruments and the precariousness of the US sub-prime market. They knew a crisis was coming, just as they now know this crisis is not over.

So is Mr Darling going to carry on pretending to be a powerless bystander, or can we be confident he is doing everything he can to prevent a big British banking name going the way of Northern Rock? Heads have rolled in the US, albeit onto silken cushions. Over here only the chairman of Northern Rock has had the decency to go. The rest are still in place.

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