Let's recall our potted history of the finance company bailouts. In short, in the midst of the 2008 election campaign, then Labour Finance Minister Michael Cullen wanted a deposit guarantee scheme to match the Australians. Our banks are Australian owned, so worries about differences in treatment across the ditch weren't crazy.
What was crazy was extending that protection to dodgy finance companies at no risk premium. Treasury worried that giving banks cover but not finance companies would have finance company depositors pull their funds and deposit them instead into banks (about which I'd have said "meh"), but Treasury also specifically warned* that they had to be charged a premium that reflected their higher risk. Instead, actuarially fair premiums weren't charged so we instead saw flight of funds into the dodgy finance companies.
Now everybody's mad that Treasury didn't do enough to stop it. Labour finance spokesman David Cunliffe was on Radio New Zealand this morning blaming Finance Minister Bill English and Treasury for the disaster. And National rightly takes some of the blame - they agreed with Cullen's rush-job deposit guarantee scheme and they subsequently didn't move quickly enough to force out the dodgy finance companies through higher insurance premiums.
I'm not really sure what Treasury could have done though once the Government had determined they weren't to charge premiums that differed by risk and while under government pressure to let everybody in. I'll have to read the Auditor General's report. It doesn't seem implausible that a Treasury juggling rather a few balls at the time could have fumbled one or two. But the root of the problem was the rush-job legislation with no provision for rationing access by differential premiums. And that goes to Cullen and Key, not to Treasury.
*Alas, Treasury's pdf server seems down so I can't get the exact wording from the report linked-to in the post above-linked. It still shows up on a search of Treasury documents here, but I can't get the file.