Bradford & Bingley is such a disaster in so many ways it is hard to know where to start. Perhaps one should begin by offering sympathy to Steven Crawshaw, who discovered that he was suffering from a serious illness last Wednesday.

That said, there is no doubt that he would have been forced to step down as chief executive anyway amid mounting evidence of management's incompetence.

The charge sheet was already long: B&B's dependence on the buy-to-let market and self-certified loans; millions squandered by the bank's treasury department on asset-backed securities; and then Mr Crawshaw's denial that B&B was contemplating a rights issue, followed swiftly by the announcement of a ... er, rights issue. Yesterday, a new offence was added to the list when it emerged that Mr Crawshaw had been running Britain's tenth-biggest bank with a reporting system that would shame a corner shop.

It would be an extraordinary achievement for Rod Kent, the new executive chairman, to take such an unpromising situation and make it worse. But that, on the face of it, is just what he has done.

Mr Kent says that the board decided to scrap the original rights issue because it would be better for B&B's one million private shareholders. If B&B had gone ahead on the original terms, private shareholders would have got nothing for their nil-paid rights, because they would be worthless. Under the new terms, he argues, at least they would get some cash for giving up the right to subscribe to new shares.

This is utter nonsense. The new terms imply a big loss of value to shareholders. They will lose £59 million because the underwriters are not being forced to buy shares at 82p. They will also be diluted by the 23 per cent stake being sold to TPG.

So why did B&B really scrap the rights issue? Citigroup and UBS, which underwrote the original issue, could have invoked the clause in their agreement that would allow them to pull out because of a material adverse change.

But it seems highly unlikely that the banks would have attempted such drastic action. It would have further damaged their reputations, already badly dented by the shoddy due diligence they performed on their client.

Perhaps more important, the FSA and the Bank of England would have taken a very dim view of them leaving one of Britain's biggest banks dangling in the wind.

Some people close to B&B mutter that had it allowed the original issue to “flop”, the share price would have slumped because the market would have known the banks would been forced sellers.

But why would this matter? There is no reason to believe it would create a panic among depositors. After all, they know that the Government would stand behind B&B as it did Northern Rock.

Presumably, if the share price fell far enough, there would be buying from investors such as TPG, which clearly thinks the shares are a steal at 55p, or half book value.

It looks very much as if the company just did not have the nerve to go ahead with the original plan, perhaps encouraged by the authorities' concerns about the impact a rights issue flop would have on the rest of the sector.

As so often, the biggest losers will be private investors, since many of the institutions will benefit from being let off their sub-underwriting commitments. At the very least, B&B owes them a more convincing explanation.

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