DAN ATKINSON: The lunacy of lavishing billions to make the banks do the very thing that caused this crisis

One of Iris Murdoch's most memorable creations is Randall Peronet, anti-hero of her 1962 novel An Unofficial Rose.

At a critical moment he brings up the subject of finance with his wealthy father, Hugh, who assumes he is looking for a loan. He is wrong. 'I don't want a loan, father. I want a great deal of money, not on loan. Nothing else will do.'

Our bankers know exactly what he means. This week's latest bail-out involves a great deal of money indeed, and when, if ever, we are going to get it back again is a moot point.

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Just to recap, this latest package involves a £50 billion fund for the Bank of England to buy loans and bonds from the banks, thus supposedly freeing them up to lend more money, £100 billion in guarantees for new bonds issued by banks to back new loans to both households, companies and homebuyers and a £250 billion Government guarantee covering the flakier loans sitting on the banks' books - in other words, we will pick up the bill if these loans go sour.

That is getting on for half a trillion pounds in cash and guarantees - not a bad week's work. Add that to the £37 billion cost of part-nationalising some big banks back in October, the £250 billion Government guarantee in the same month for bank fund-raising on money markets, the £50 billion funding lifeline for small firms unveiled this month, along with the £10 billion-plus guarantee for small business loans, launched also this month, and pretty soon you are talking about real money.

Now what we are getting for all this expenditure is not entirely clear. When a wild-child son or daughter comes home with their tail between their legs, all money spent, with enraged college tutors in hot pursuit, even the most liberal parent will practise a spot of tough love.

In return for financial help and use of their old bedroom and the family washing machine, they have to promise to clean up their act in one way or another and start to behave rather more seriously.



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Our bankers, in contrast, are presented with no such quid pro quo - rather, they get an awful lot of quids and no pro quo. These prodigal sons and daughters are treated to a banquet of fatted calf every night, courtesy of the taxpayer.

Any rational shopping list of demands from the Government would include the demerger of some of the big banks, in order to promote competition and reduce the risks to the system, the strict separation of clearing banks, investment banks and fund management and a proper branch network with independent managers.

As it is, the Government makes no demands at all - bar one. The sole demand is that the banks ‘start lending again’. It was, of course, excessive lending that caused this crisis in the first place, which makes it quite bizarre that we are spending huge sums of taxpayers’ money to try to get them to do it again.

Why? For the simplest reason of all. Running a debt-driven boom economy is the only thing the Government knows how to do, and re-starting such a feverish and bust-prone set-up is top priority, at any cost.

Randall got his money, by the way. Hold tight for the next bail-out.

The Gods that Failed: How the financial elite have gambled away our futures, by Larry Elliott and Dan Atkinson; Vintage; 2009