I think that Mr Kaletsky's analysis is correct short-term, but disastrous long-term. Of course we should not reward or bail out individual executives at badly run banks, but we also have to distinguish between liquidity problems and solvency problems.

If a bank risks going under because it holds illiquid assets, then a loan is not a bail-out, but a temporary measure to tide it over until its assets have a liquid market once more.

On the other hand, if a bank is actually insolvent, then it is better to let it go under or be bought out than risk taxpayer money.

These are two different cases, and it was the inability to distinguish between them that turned that stock market crash of 1929 into the Great Depression.

Moral hazard is a fine thing to avoid in principle, but if it is your job, your bank, and your economy that is on the line, a little bit of moral hazard is not the worst of all possible outcomes.

If you doubt that, ask your grandfather.

jon livesey, Sunnyvale, CA/US

"The worry we have now is that there is still an awful lot of credit money slushing around being used by traders desperately try to make up enough money to recover, hence we see a 35-50% premium on the oil barrel price that would not otherwise exist." Alistair Kipling

Where is the evidence that there is a 35% "premium" on the oil price? There is much talk at the moment that oil prices are as high as they are because of speculation. As I understand it, there is speculation but it works out as a zero sum because speculators do not take delivery of real oil. Therefore, for every futures deal there is a buyer and seller which balance each other out. Oil is increasing in price because there is more real demand than real supply - nothing to do with speculation. If USA is growing strongly (which I greatly doubt) then oil prices will just keep rising. If US is not growing strongly it will still rise, but not so steeply, because of Asian demand. I would suggest downsizing your cars - now!

Steve, Stratford,

To give you an idea of the amount that has been loaned - it is broadly in line with the Government forecast expenditure on defence for this financial year. It is also equivalent to 7p on the rate of income tax. Northern Rock has/had about £100 billion in assets - so requires funding AT THE MOMENT for about a third of the assets.

Whilst the percentage of money loaned with Northern Rock is very high and thus has caused its liquidity problems, we should remember that Northern Rock is a very small bank. Barclay's has about £1000 Billion (£282 billion in loans, £138 billion in derivatives and £175 billion in reverse repurchase agreements. ) The amount held in cash is only £6 billion or so. http://www.investorrelations.barclays.co.uk/INV/A/Content/Files/BB_final.pdf

I don't know what the figures mean but a substantial loss in either of the amounts stated would make £30 billion look like chicken feed

John Wood, Consett, Great Britain

Let them lose their money. Maybe the next time the term ' Moral Hazard ' will have some meaning. If the Pols let them off, can we have any profits from future correct ' guesses'?.

Desmond Taylor, Houston, USA Tx

I was not aware that the government was giving any money to Banks - but that the Bank of England was lending the money (with cover) at a highish interest rate to avoid a situation that no one in this country with half a brain would want to see.

Marty, London, England

Talk about multivarient analysis
Viz: Banks - could stand some oversight. - legacies can be a burden both in inappropriate and impenetrable behaviors.
Plus there is nothing preventing other nations from doing their own banking and so global growth for local banks seems problematic, therefore they will be limited to local opportunities, *whether* good or not.
Viz Oil prices this is obviously a speculative effort - not to say in five years oil won't be 150 a barrel, but sudden increase indicates hanky panky.
Viz macro econo factors- while info tech is the successor to manufacturing - it employs fewer people and people are far less able to accept loss of previous gains then slowing of increase. This unleashes witches brew of bad solutions, such as protectionism, but if a nation can't compete then what right have we to blame them for being protectionist?
Blackmail is such an ugly word.....I prefer "creative persuasion"

glenn schaefer, holbrook, uSA

Governments in Anglo-Saxon economies made an explicit commitment to non-intervention in their economies in order to avoid creating "market distortion". This rule was stuck to through thick and thin and previously industrialised economies were de-industrialised as a result with no mercy shown to the employees, shareholders or dependents of these firms. We were told that "that's the free market" and "intervention would only make it worse".

If that's the case, then any intelligent observer has to ask why this is different for the banking industry? Either all industries and sectors get bail-outs or none of them get bail-outs. A similar preference has been shown towards BTL investment in the last few years. It's a major contributor to high prices and first-time buyer woes, but no-one in government dares to suggest tax increases on investment property or rental income. In fact they reduce the rate of CGT on such properties instead! It is blatant corruption.

MB, Edinburgh,

I agree with the comments that the Labour government allowed the mushrooming of personal and mortgage debt in the UK, in order to boost property values and thereby their own popularity. BoE independece was simply an excuse for Gordon Brown to wash his hands off the process by which this malign scheme was executed. Now the chickens are coming home to roost and property values and the securitised mortagage debt that supported these will now crash to where the market equilibrium demands they should be - i.e. at around 3.5 times average personal income.

B Shah, Stanmore, England

We still dont know what the write offs are for the British banks.
What are they afraid of .? Come on chaps play up and play the game, lets see that Bulldog Spirit.

Trevor Ford , Worcs,

Totally agree, though at what point is the question asked "Have the heads of these banks been incompetent or inaccurate with the truth...or both things?" During the last 3mths, we have been assured continuously that there was/ is no problem & now banks are starting to come clean, first by admitting that they have losses after all, then that they're bigger than they though, then eventually- but apparently not yet- what the true size of their error has been. It was motivated by greed for profits, greed for bonuses, greed for share price performance (funnily enough, these same people have share options too) without due reference to proper risk taking. It is a disgrace that people who perform their job so badly get the "punishment" of a resignation & huge pay-off...then presumably another job somewhere else (don't get me started on Prem League footballers on non-performance, non- result, non-appearance -related pay !). The taxpayer should not be bailing out these insitutions & individuals

DAVID STYLES, City of London via Merseyside, UK

Alistair Darling now has the wolves at his door but this mess should rightly be at the door of No 10. It is the 10 years of Gordon Brown's economic mismanagement of our economy that has led us here. To put it simply, he has encouraged debt and will be remembered as the 'never never' Chancellor. Certainly financiers and imprudent bankers must take some pain but it was our political masters who led us this sorry dance!

Steve Marchant, Torquay, England

I agree with this assessment. If I make a bet on a horse because I have drugged it to make it faster, but the horse dies half way round the course I do not get my stake back. Similarly, the bets against future prices in stocks should not be refunded. The worry we have now is that there is still an awful lot of credit money slushing around being used by traders desperately try to make up enough money to recover, hence we see a 35-50% premium on the oil barrel price that would not otherwise exist. Is it not possible to think that this could be the new hyperinflation or recession bearer.

Alistair Kipling, Birmingham,

I don't understand Eric Campbell,

We are paying for the Crock to the tune thus far of about £23 billion (probably now a few £billion more) and the tab to you and I is likely to be about £40 billion by the end of the year, but still New Lie-bour won't let it go, why?

£30 billion to me seems quite cheap subsidy in comparison doesn't it?

How much subsidy do you say that it requires from Prime Minister (Crash Gordon) Brown Unelect? and Captain Dhaling?

Pete Balchin, Solicitor , Bristol, UK

In the 80's the government of the time broke the unions power because of the undue strain it placed on business, now with the opposite true and the managers being an undue strain on business, nothing is done. Why is this?

Ben, folkestone, uk

As an international banker I cannot understand why anybody would not want to help us out in these difficult times. Where is your sense of charity? Fair play? Honour? It's very hard work being a banker - long hours at the office (it's not just pounds we're talking - it's millions), foreign travel to hot places, long hours calculating the bonus. OK it's true that the computer program does all the work but someone's got to watch the screen, and more importantly, the other guys. And you have to get around a lot in case there's any useful information being let drop about an acquisition or an auction - without that inside stuff where would the nation's economy be? The lot of an international banker is a hard one, let me tell you. So why wouldn't the government help us out? It's no good saying we got rich - all that dosh has been spent. And it's financial services that drive the economy, isn't it? So where's your human charity, huh?

john problem, london,

Is this not time for Governments to protect the house-owners (voters) and let the lenders hanf out to dry? After all, the lenders pushed money onto people who cannot pay back. Why should the lenders (banks, building societies, hedge funds) be rewarded for usurious practises and pyramid fraud?

Sure, people who took loans they could not repay shoudla slo pay a price, but at what cost to society?

Tiresias, Pretoria, South Africa

Why is Labour keen to help Northern Rock?
Look at the directors, executive and non-executive.
Do you find anyone not in bed with Labour?
Is not Labour desparate to hold on to seats in north east England?
Just a thought.

john, london,

A couple of days ago the headline was 'Tories slam Darling' for failing to back the Lloyds TSB takeover and handing the £30 billion over. Which gives you a good idea of the Tories financial acumen and their attitude to our money - take it off the taxpayer and give to their banker chums. Darling was right to refuse - if fools at Lloyds TSB want to throw shareholders money into a bankrupt organisation that's their and their shareholders' affair, but they should not be allowed to put their hands into my pocket (or yours, or even those of the financial illiterates who were shouting about Labour's 'incompetence' in these HYS columns the other day) to do it. Northern Rock is dead and has been for months - if gravediggers want the body - fine. But they can pay for it.

eric campbell, harrogate, uk

One over-riding fear in this situation is that if governments bail out finance houses that have gambled unwisely, might the resultant demonstration that there is now a "safety-net" actually underwriting all risk just spur these financiers on to bigger (and even more risky) forms of deal-making? Who are the innocent ones in this situation? For sure the people who put their hard earned savings into banks like Northern Rock are by-and-largely naive of economic investment vehicles etc, and who would deny that they deserve some security for their hard earned savings?-the government is surely correct to reassure them, however, as for the financiers themselves who were much more knowledgeable in this affair-a tougher stance should be taken! But the public should be told more, and should ask more, just where the interest on their investments is coming from? Trust in banks has been shattered by this amonsgt many members of the public and it will take a long, long time to recover, if ever.

Matt, Leeds, West Yorkshire

Quite right. Put the fat cats on a diet. Do these people not read history? We have witnessed another bubble due to greed and over confidence yet again, but these bankers, due to their undoubted importance to the world economy expect to be feather bedded instead of suffering the ignominy so many richly deserve. And they will still come out of it quite nicely. These are not coal miners or car workers put on the scrap heap for the rest of their lives. These are bankers with huge pays offs for their stupidity and greed who will be a little embarrassed for a while before retiring to their vast country piles and sybaritic lives of idle dissipation . As usual the people at the bottom will be made to pay for their bosses' excess by getting considerably less handsome redundancy packages or having their jobs transferred to India. Stick to your guns Mr King and lets hope the government allows him to keep his job come the new year thus sending the only message to the fat cats they deserve to hear.

Paul Owen, Birmingham, UK