REJOICE!

Britain's banks are back in business again. State-owned RBS and part-nationalised Lloyds, the mega bank that swallowed HBOS after the 2008 crash, are back in profit, allegedly, and ready to be sold out of public ownership. Hallelujah - we're saved.

Royal Bank of Scotland - once known as the worst bank in the world, under "Sir" Fred Goodwin - has a new boss, New Zealander Ross McEwan, who comes from the bank's retail banking division. He says he won't be taking his bonus this year or next, which is jolly nice of him. But since he's being paid a reported £1 million a year plus £350,000 in pension payments, he won't exactly be shopping in a bargain-basement store.

McEwan's predecessor, Stephen Hester, said RBS has gone from being a "bust bank to a normal bank". Though if this is normal, I'd hate to see what abnormal looks like. These banks still hold billions in dud loans and mortgages and have been kept going largely through infusions of free money under "quantitative easing". The Bank of England's Financial Policy Committee said last year that Britain's banks are concealing up to £60 billion of unaccounted losses.

And last week it emerged that Britain's banks have so far paid out more than £18bn in compensation to people who were mis-sold payment protection insurance (PPI). The full cost will be almost £400 for every adult in Britain.

The practice is politely called "mis-selling", though I think if I were a high-street trader who had taken money under false pretences, or sold goods that didn't work, it would be called something rather different. Like fraud, for example.

You or I would be in jail long since, but so far as I am aware, none of the fraudsters in RBS, Barclays, Lloyds or any other bank has been brought to book for PPI. Or the Libor fraud. Or those endowment policies. Or any of the other underhand ways the banks have been picking our pockets for the last 30 years.

So, with all these penalties and defaulting loans, how are RBS and Lloyds suddenly recording big profits? Well, one way is by racking up charges on overdrafts if you step just a toe into the red. Another is by paying little or no interest on any deposits you have made at the bank, while lending this same money out at anything up to 7% to businesses and homebuyers. They also get nearly free money from the Bank of England, which they lend out again.

Banks have also been making money by selling small businesses complex derivative products called "interest rate swaps" The Financial Services Authority condemned the practice last year. RBS has put aside a reported £350m to cope with the legal costs of this latest scandal.

But banks also make money more discreetly by rescheduling loans to mortgagees, private individuals and businesses. In the early noughties, banks were throwing money at anyone who asked for it. "Take a 100% mortgage … no, make that 125%." Now, six years on from the great crash, things are different. "Sorry folks, we don't do that any more, and nor do we do interest-only mortgages." In fact, you are going to have to remortgage with us at another interest rate - plus a big four-figure fee. Oh, and you'll have to find the 20% deposit that you didn't put up five years or three years ago. Oh, and that'll be 20% of the original price of the house, not the price it's worth today …

As a result, banks have lots of property on their books acquired from distressed borrowers at knock-down prices. A lot of it has come from property developers who have gone into liquidation because they couldn't afford the cost of remortgaging their portfolios. Many small firms have also gone under during the crash because they couldn't keep up their debt payments.

This is why there is some truth in the banks' claim that, far from their refusing to lend, small businesses aren't asking to borrow from them. Well, once bitten … Many small businesses have been forced to put up their family homes as collateral for bank loans and many of these also find their way into the banks' property holding companies.

The banks are able to behave this way because they are so big that "normal" doesn't apply to them. RBS and Lloyds should have gone bust years ago, but because governments couldn't afford to let them go bust, they have essentially stuffed their mouths with cash.

Banks have used their huge financial muscle to make monkeys out of the regulators, hold the Government to ransom, run rings round the Bank of England and commit bank robbery in reverse on the rest of us.

You may think this a harsh judgment by an over-wrought columnist. Some politicians say it is time to stop "banker-bashing" and to recognise that financial services are a vital part of the economy and create hundreds of thousands of jobs. Perhaps. But that doesn't alter the fact that these are the very banks - and bankers - that created the financial crisis and they are quite capable of creating another one through their insatiable greed.

Even the departing governor of the Bank of England, Sir Mervyn King, said that the banks remain a liability. In his departing speech to the Mansion House in the City in June, King said: "It is not in our national interest to have banks that are too big to fail, too big to jail or simply too big."

This was an astonishing verdict from the man at the very pinnacle of the financial establishment. Britain's banks are above the law, above regulation, even above government - anything but "normal". When are we going to get the message?

Public ownership was a historic opportunity to put an end to banking delinquency. When the banks collapsed and were taken over in 2008, everyone said: it must never be allowed to happen again. Even the Conservative Chancellor, George Osborne, promised root-and-branch reform of the banks.

The banks' managements should have been purged, bonuses ended, the speculative "investment" divisions closed or split from retail banking and sold off to the hedge funds where they belong. Britain's banks could have been reconstituted as public institutions with a socially responsible remit to manage financial wealth in the public interest as well as their own.

This is not an unrealistic goal. In Europe, the EU has moved to reform the banks by proposing a financial transactions tax, curbing bonuses, controlling speculators. Britain, to its discredit, is trying to frustrate Brussels' attempts to change the culture of banking, confirming that the banks still have political clout.

The worst possible outcome is the denationalisation of these behemoths, unreformed, unchastened, unprosecuted - able to return to their corrupt ways with impunity. Bankers who should have been in bracelets are back in charge of the nation's finances. All we can say is: God help the rest of us.