Leading article: Shoot first, ask questions later

Having apparently played an important role in the rescue of HBOS – for which he should be congratulated – the Prime Minister has now pledged to "clean up" the City. His first move, a ban on the highly contentious and damaging process of short selling of bank shares, is an inevitable consequence of the unprecedented events of recent days. It is welcome, and almost as if Mr Brown were Chancellor again; a glimpse of a premiership that might have been.

On this issue, the authorities are sensibly acting on the precautionary principle; in markets as febrile as these it is right to take the cautious line. If short selling did contribute to the crisis at HBOS, and still threatens yet more banks with near collapse and runs by their depositors, then an immediate ban is probably the most effective single step to promote stability that the regulators can take. If the damage done by short selling proves to be more myth than fact, then the only harm done is that the hedge funds and others will have been deprived of a useful but not essential financial tool. The balance of risks clearly favoured this new rule, and the Financial Services Authority should pursue it vigorously.

However, despite his uncharacteristic recent willingness to shoot first and ask questions later, Mr Brown still makes an unsatisfactory sheriff. Why, it has to be asked, was a ban on short selling not enacted during earlier damaging raids on bank shares, including the dramatic one on HBOS in March? A very limited move requiring the disclosure of short positions during rights issues was brought in, but that proved quite useless during the current crisis. Another pertinent query might be to wonder why Lloyds TSB was so successfully enticed into taking over Halifax Bank of Scotland for £12bn, yet was somehow allowed to slip away from a potential rescue of Northern Rock last year. Even if that move had required some government guarantees, the exposure of the taxpayer would have been less than the nationalisation which inevitably followed. It is encouraging that Mr Brown and his regulators seem to have learned their lessons from the run on the Rock – but depressing that that same imperative of preserving financial stability – was so little understood by them a year ago.