The Bank of England's governor, Mervyn King, has been defending his actions in the Northern Rock crisis during questioning by treasury committee MPs

Bank of England governor Mervyn King has had better weeks. On Wednesday, last week he penned an erudite paper to the UK treasury select committee outlining the Bank of England's thinking on the state of the financial markets and the circumstances in which the "Old Lady" would - and would not - step in to help.

That, though, was before Northern Rock blew up in the British government's face. Yesterday, King was giving evidence before the self-same treasury committee and the governor was greeted with something less than the customary deference and respect normally shown by backbench MPs to the man in charge of interest rates.

Instead, it was clear from the start that the hunt was on for a scapegoat for Northern Rock and that - thanks to a whispering campaign orchestrated by those in the City irritated by King's reluctance to spray cheap money at those now counting the cost of reckless lending - the Bank of England was in for a hard time.

In the event, the governor gave a good account of himself. This was no real surprise: for two reasons. First, for all the loose talk this week, King has had plenty of experience dealing with crises. He had, after all, only just been appointed chief economist at the bank when the pound was turfed out of the Exchange Rate Mechanism on Black Wednesday - a day that not only left the bank denuded of foreign exchange reserves but left the government without an economic policy.

Second, the bank has a reasonable case - and King outlined it clearly yesterday. Firstly, he stressed that Threadneedle Street was not being "puritanical" in its insistence that help for banks with cash flow problems should come at a price. The bank wants to get the message across that institutions which behave prudently and responsibly should not be penalised.

Moreover, the idea of moral hazard - encouraging future bad behaviour through a general bail out of the financial markets - was not a dry academic concept but a real threat to the future stability of the economy. In this respect, the governor is right. Bowing to pressure from the markets - as the US Federal Reserve did earlier this week when it slashed interest rates - is asking for trouble.

King did call for a legislative overhaul to help prevent a repeat of the Northern Rock crisis. He said he had pressed for a "covert" rescue of the Newcastle-based bank to prevent the queues of panicked savers. But he said the bank was prevented from launching a secret rescue of the mortgage lender by market abuse regulations and City takeover rules.

He added that current rules that fully guarantee only the first £2,000 of savings, and freeze deposits in the event of a bank failure, added to the panic, which was only averted by the government's cast-iron assurances over all savings.

King candidly admitted that - with hindsight - the authorities might have acted differently. It would have been better, undoubtedly, to announce last Friday that all the savings of Northern Rock depositors would be guaranteed rather than wait until Monday afternoon.

But few commentators - even those who have since castigated King - were calling for such action last Friday morning when it was thought that the news that the bank was acting as lender of last resort would have been sufficient to ease public concerns.

The governor also faced down criticism that he acted too slowly to bail out Northern Rock, saying that moving too early would have been "irresponsible". He told MPs that an early injection of funds into the money markets where Northern Rock raised most of its cash for mortgage lending would have "sent a signal that the UK authorities were concerned about the banking system".

Concerns about Northern Rock were first discussed by bank officials with the Financial Services Authority (FSA) and the treasury on August 14th - a full month before the bank announced its emergency funding package. The governor said the bank had given time for Northern Rock to attempt to raise funding by selling assets, or arrange a takeover, before stepping in as the lender of last resort.

He said that earlier interventions would have panicked markets and "blown up the train before it hit the buffers". Despite the governor's defence of the bank's actions, it is clear this story is far from over. The fact that the prime minister's official spokesman was forced to say that the governor retained the full confidence of Gordon Brown is proof of that.

But those thinking of jumping on the City's anti-King bandwagon should be careful. With time, the government should ride out the Northern Rock crisis.

What it would not survive, however, would be a witch-hunt that drove King out of office. Brown knows that, and it might be a good idea if he communicated that message to his troops before next week's Labour conference.