Bradford & Bingley. The name said it all: safe, dependable, just a little bit dull. Northern Rock, the same. Solid, not flashy.

And that is what they were when they were building societies, owned by their depositors and borrowers. But safe became old-fashioned. Safe was economically inefficient.

So both were liberated from the restrictions of their mutual status and turned into stock market-listed banks during the wave of demutualisations in the Nineties. But the process has been an unmitigated disaster. All these banks have either collapsed – Northern Rock and Bradford & Bingley – or been bought up in various states of distress – Alliance & Leicester and HBOS.

The only winners were their senior executives, their City advisers and the few members who cashed in their windfall early when they became shareholders.

The losers include thousands of employees whose jobs will be cut, bank customers who will suffer from reduced competition, and taxpayers whose losses could run into billions. Nationwide, the one big building society that resisted the temptation to sell out, is still going strong.

The former building societies tended to make three big mistakes once they were let loose in the exciting new world of public companies. B&B made them all.

In a dash for growth, they tried to find areas of the mortgage market that were underexploited. In the end, they found that they were underexploited for a good reason.

B&B carved out a niche in lending to buy-to-let landlords and to borrowers who could not, or would not, provide evidence of their earnings. These self-certified mortgages, dubbed “liar loans”, are going bad in much higher numbers than ordinary mortgages.

Escaping the building society shackles meant that the new banks no longer had to rely on savers’ deposits to fund their mortgages. To finance their growth, they borrowed money on the City’s wholesale markets. When the credit crunch struck, these markets dried up and the likes of Northern Rock ran out of money.

The third mistake B&B made was to try to boost its returns on the cash it was holding by putting it into “exotic investments” based on American mortgages. The returns were substantial for a while. Then, so were the losses.

Britain’s established high-street banks made many of the same mistakes. But they are much less dependent on the sickly housing market.

The good news is that, assuming the HBOS takeover by LloydsTSB goes through, there are now no big British banks on the critical list. The bad news is that plenty of big banks elsewhere in the world are.

Last week the US Government seized control of Washington Mutual – a huge mortgage lending bank – in a move that not only wiped out the bank’s shareholders but also left the financial institutions from which it had borrowed its money nursing losses running into tens of billions of dollars.

That will make such institutions even more nervous about lending to other banks, thereby making the credit crunch that much worse.

As the B&B crisis was reaching its climax in Britain yesterday, government officials in the US and Belgium were involved in talks to agree on the rescue takeovers of two much bigger banks, Wachovia and Fortis.

Even if the $700 billion (£380 billion) US bank bailout plan is signed into law, these rescues are unlikely to be the last.

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