Banks are still gambling with the public finances

Stocks of invective are running low. Is there much left to say about banks and bankers that rises above the level of splutter and scream? In the United States, unemployment has surged again, to 9.5%. In Britain, one in 10 of this year's graduates has little or no hope of finding a job. The bankers, aided and abetted by supine legislators, did this.

They know that we know.

Judging by reports emerging from the annual conference of the British Bankers' Association, held in the City this week, they just wish we would stop going on about it. Angela Knight, the association's chief executive, believes that "now is the time to stop the blame game". Why?

Because the banks have mended their ways? The £9.7m offered to a state employee - Stephen Hester, chief executive of the Royal Bank of Scotland - for bumping the share price beyond 70p is only one egregious example. The "bonus culture", a scam based on the misrepresentation of performance, is alive and well.

Stuffed with public money, meanwhile, the banks remain reluctant to recognise a public duty. They claim to have increased lending. Small businesses and first-time house-buyers tell a different story. Balance sheets are being rebuilt, not least in the rescued institutions, while the jobs of ordinary banking employees, never well rewarded, are laid waste. Some 7000 posts have already gone, thanks to the ramshackle merger of Lloyds TSB and HBOS. One estimate says that the figure could rise to 25,000.

You could be simplistic about it. Bankers hate that. You could forget about the need to restore institutions to marketable health and wonder how surreal things must become before arcane notions of moral hazard are applied universally. So the taxpayer surrenders billions to rescue banks from the consequences of their own folly and then picks up the bill for unemployment in the banking sector?

A crisis of this magnitude should provide opportunities, ironically enough. It should allow politicians to understand, for one thing, that there is nothing particularly rational about the financial sector. Remember all those horribly complex securitised "instruments" that magnified the risks they were supposed to eradicate? Have the banks sworn off that game? Are their dealings now simple and transparent? Has there been, or will there be, regulation to ensure that the catastrophe cannot happen again?

Andrew Haldane, the Bank of England's "director for financial stability" - does he get out much? - is late to the party. Nevertheless, he has just said all that needs to be said about sophisticated 21st-century banking and the brilliant, vastly rewarded folk who have transferred a mountain of debt to the public. It has been, says Haldane, the equivalent of the South Sea Bubble, a fools' gold rush in which managements "resorted to the roulette wheel".

Did I mention simplistic? As best I am aware, no bank directors, executive or otherwise, have faced charges because of this debacle. That's odd, on the face of it, given the apparent clarity of company law. Then again, no politician, regulator or central banker has accepted responsibility either. As to the idea that there can be "no going back", best ask a banker. Your answer is liable to be: "Says who?"

Alistair Darling, the Chancellor, has been very stern. In his latest interview, he says of the banks: "There are people who have been too complacent in my view. They need to be brought back to earth." So what does the government propose?

A cap on bonuses? No. An end to disastrous "tripartite" regulation, as devised by Gordon Brown, that has the Bank of England, the Financial Services Authority (FSA) and the Treasury struggling to decide who is responsible for what? No. A recognition that banks that are "too big to fail" are simply too big? Apparently not. Or how about an acceptance of the idea that normal banking should be insulated from the roulette players? No chance.

There will be a Banking Act to echo the sound of stable doors closing. The only deterrent to risk-addicted players in the banking casino, however, is the possibility of "richer and more frequent" disclosures of information, and the notion that banks should hold larger capital reserves if pay packages become ridiculous. Make that "more ridiculous": if the Hester deal is acceptable to the government, the bankers have little to fear.

The government is timid indeed. Why might that be? As David Miles of the Bank's monetary policy committee has conceded, banking remains on "life support". Despite their impertinent claim that regulation would dull their creativity, bankers are over a barrel. The public would not demur, it is safe to say, if they were cuffed. The threat of a flight to Switzerland or the Gulf is, meanwhile, both empty and intolerable. The City may be important to the economy, but it has also been hugely destructive of that economy. Besides, since when did HMG yield to blackmail?

That was a joke. Clearly, the government is not yet prepared to accept the logic of its own actions. It remains hypnotised by City wealth and City propaganda. It is terrified of the idea that New Labour could ever be mistaken for a socialist administration. And it will, at all costs, avoid attributing blame to a Prime Minister who, as Chancellor, did nothing whatever to discourage the irrational exuberance of Fred Goodwin and his kind.

State ownership: why is that anathema? Because the government is populated with City types such as Lord Myners, an unelected Treasury minister? Because Lord Turner, chair of the FSA, is a reinvented private sector ideologue who deems even a British Glass-Steagall Act, splitting deposit-taking and investment banking, "unworkable"? Or simply because New Labour is entranced by the seedy glamour awarded to banking executives by feeble shareholders?

The belief that "private sector solutions" must always be preferred got its answer along the east coast main line this week. That bit of privatisation is still costing the state more than British Rail ever cost. We are still footing 50% of the bill for getting over-priced trains to run, and seeing no profit for it. Now the Treasury punts the idea that a salvaged Northern Rock could fall into Tesco's lap. The slogan must be forming: What's Good For Tesco is Good for Britain.

Try this instead. "Instead of selling, the government should use it (Northern Rock) to establish a Post Bank' and invest in the long-term future of the Post Office." The proposal continues: "A trusted and non-profit-making bank run through the Post Office network would address the need for finance for viable small firms, introducing diversity into the retail banking system and protecting the Post Office network."

What's wrong with that? Those were not my words. That was John Wright, chairman (in England) of the hard-left Federation of Small Businesses. But the bankers wouldn't care for "unfair" competition, and a Labour government always dislikes anything those market-makers dislike. So it is reduced to saying Boo! while warning overgrown kids in a sweetie shop not to gorge themselves.

It happens to be the most expensive Boo! in British history. And it tends to demonstrate Dorothy Parker's maxim concerning compromised intellects: you can take a whore (or a politician) to culture, but you can't make her think.