Tim dismisses as "tosh" Owen's claim that the crisis "has roots in the Thatcherite free market experiment." I half agree with both. I suspect the banking crisis does have Thatcherite roots, but they have little to do with free markets.
I'm thinking here of two merchanisms.
First, Thatcher recognized that voters don't just create governments, but governments also create voters. In relaxing mortgage lending controls and in selling off council houses, she created a new class of property owners. This class had a vested interest in high house prices. But high house prices naturally lead to high mortgage debt and thus to banks which lend heavily and are over-extended*.
Secondly, Thatcher helped to spread the ideology of centralized managerialism. We see this, for example, in her assertion of "management's right to manage" against any conception of co-determination, and in the increase in central government control over local authorities. We might add that her image as a domineering "iron lady" helped to glamorous and legitimate an overbearing management style which is intolerant of dissent. This ideology gave us the pig-headed bosses who contributed to the collapse of so many banks. Fred Goodwin and James Crosby, more than most, are Thatcher's children.
This story agrees with Tim, in that it is consistent with the banking crisis being a crisis not of free markets, but of managerialism. The banking crisis shows us not (just) that free markets don't work, but that hierarchical organizations with bullying managers don't work.
But it also agrees with Owen, in claiming that the crisis does have Thatcherite roots.
These two claims are quite consistent, once one recognizes (as Tim and Owen half do in their different ways) that Thatcher was not a free marketeer but a class warrior.
* Intelligent economists of all colours have often called for land value taxes, more housebuilding and monetary policy to pay more attention to asset price bubbles. There's a reason why such policies have little public support. That reason is rooted in Thatcherism.
Another thing: one could also argue that Thatcher's cut in top tax rates helped to incentivize not just good entrepreneurship but also the rent-seeking and excessive risk-taking that contributed to the crisis.