Two shareholder votes in the last two days should ensure grim reality returns to the discussion of what the future holds for Edinburgh-based HBOS and Royal Bank of Scotland.

Two shareholder votes in the last two days should ensure grim reality returns to the discussion of what the future holds for Edinburgh-based HBOS and Royal Bank of Scotland.

Wednesday saw 96% approval from Lloyds TSB's investors for its UK Government-brokered rescue takeover of HBOS and a state-backed fundraising. Many of the big institutional investors in Lloyds TSB also have large stakes in HBOS and will vote resoundingly again for the deal at the latter bank's extraordinary meeting on December 12.

Yesterday, there was 99%-plus support from Royal Bank of Scotland shareholders for a £15bn Ordinary share issue in which the government, based on this institution's current share price, will end up with a 58% stake .

The government also looks set to end up owning the maximum possible 43.5% of a combined Lloyds TSB-HBOS.

This week's shareholder votes have confirmed what has looked inevitable since the global credit crisis entered a truly scary phase in the wake of US investment bank Lehman Brothers' collapse - that the UK Government was the only party which could ensure HBOS and Royal's very significant problems did not lead to catastrophe for the wider financial system.

Institutional investors are not known for their love of government intervention. There is usually much argument about valuations of their holdings, and sometimes the writs fly on this score. But this week's votes show them biting Chancellor Alistair Darling's hand off for the government's capital.

Writ large in these institutions' overwhelming support is their view that something is better than nothing when it comes to some of their UK bank shareholdings.

Such investors always look for alternatives which might enhance their financial position. This time, they have been savvy enough to realise there is no wildly happy ending to this sorry tale.

The government wasted no time in lining up the rescue takeover of HBOS by Lloyds TSB, as the parent of Halifax and Bank of Scotland found itself in dire straits when wholesale funding markets seized up after Lehman's failure. The government then rushed to Royal's rescue with a recapitalisation scheme which was presented as a sector-wide programme but has in fact been limited essentially to Royal, HBOS and Lloyds TSB.

In spite of the inevitability that what government had decreed would come to pass, given the potentially catastrophic scenarios if it did not, there has in certain quarters been much hot air about alternatives and a distinct lack of cool thought. In particular, there has been way too much heat and far too little light in some of the comments about HBOS's plight.

It is easy to understand the passions aroused by HBOS's loss of independence, even though it has for some years now clearly not been as Edinburgh-based as Bank of Scotland was before its merger with Halifax to form this bank in 2001.

However, this is no time for wishful thinking.

As The Herald highlighted soon after the original terms of Lloyds TSB's offer for HBOS were announced on September 18, the discount at which HBOS shares were trading to the bid value demonstrated the City's view that the price being paid would be cut. And it was.

But suggestions that HBOS could somehow remain independent, or that there was a rival bidder, always looked like fantasy.

Jim Spowart, who worked for Royal Bank and its Direct Line subsidiary before helping build Standard Life Bank and HBOS's former standalone Intelligent Finance teleweb mortgage provider, was held up by some as a man with a rival bidder for HBOS up his sleeve.

The identity of any such mystery bidder was not disclosed.

There was talk of a European outfit. Then vague rumours about Bank of China.

Then there were reports that a bidder may have been scared off by the publicity, as Spowart withdrew.

It is utterly lamentable that tens of thousands of innocent employees will lose their jobs as a result of HBOS and Royal's predicament at a time when unemployment is set to surge.

However, while Spowart's heart was in the right place in trying to avoid the huge job losses which look likely to result from HBOS's takeover by Lloyds TSB, he looked from the outset to have set himself an absolutely impossible task.

After all, the government was not racing to line up a rescue deal for HBOS for the good of its health.

As Spowart's campaign neared its end, former Bank of Scotland chief executive Sir Peter Burt and ex-Royal Bank of Scotland chairman Sir George Mathewson pitched up.

They had no money behind them. They did not even dangle the prospect of a mystery bidder.

But they thought they should take over the top jobs at HBOS, with Mathewson chief executive and Burt chairman, and that it was possible they would find a way to keep it independent.

They received short shrift from the City.

And Chancellor Alistair Darling made it plain on Tuesday that the government's recapitalisation plan was dependent on some basic conditions such as a business plan, access to funding, those kind of things.

Crucially, he signalled that the Treasury was unlikely to be as generous again in underwriting share issues by the likes of HBOS.

Darling is right not to be mucking about.

And institutional investors, though no doubt sick about their losses to date, recognise a decent offer when they see it.

The government is prepared to pay 113.6p each for HBOS shares - which closed last night at just 72p.

It is taking Royal shares at 65.5p each. Shares in Royal closed last night at 46p.

And the government is prepared to pay 173.3p per Lloyds TSB share. Lloyds TSB closed last night at 125.3p.

It is precisely because no other investor would, based on prevail-ing share prices, take additional stock in the banks at such a high price as the government is offering that the UK taxpayer looks set to end up with all the fresh Ordinary share capital being issued by these three banks. This would give it the maximum possible 58% of Royal, from which it is also taking £5bn of Preference shares, and 43.5% of a combined Lloyds TSB-HBOS, whose component parts are issuing a total £13bn of Ordinary stock and £4bn of Preference shares.

There is no time, given the urgent need for massive capital injections, for playing at fantasy banking. No point thinking about what might happen in a parallel universe.

Given where things have got, the government's grand plan is as good as it gets in the real world.