So Mr Brown goes to Wall Street, glad of another opportunity to portray our economic and financial troubles as a sleazy American import. With the combination of naivety and hubris that is becoming a hallmark of this Government, we are briefed that he will “urge American banks to come clean over losses”. Uh-huh. Maybe he'll also urge the Pope to clean up paedophile priests.

Gordon Brown's call for British banks to pass on lower interest rates to customers is also disingenuous. Even Northern Rock, which is owned by the Government, seems deaf to the plea. Within hours of his summit with banks at Downing Street on Monday, Halifax had raised its mortgage rates again. He knows perfectly well why, but he cannot help indulging in a bit of populism at a time when he stands accused of not understanding the fears of ordinary people.

On the face of it, it seems crazy that banks can avoid giving borrowers relief by lowering interest rates. And it's irritating for borrowers who are trying to take out fixed-rate mortgages. Unfortunately, there are two sound reasons for it: a shortage of capital and a lack of liquidity.

Capital first. Thanks to breathtaking greed, and the astonishing complacency of our own regulators, the British banking system turns out to be the most overextended in the world. British banks hold roughly £60 billion more in loans than deposits. Companies such as Barclays and RBS are three times more “leveraged” up, compared with their equity, than any US bank is legally allowed to be. If Mr Brown learns anything on Wall Street, it should be that banks must have higher capital adequacy ratios.

The result is that banks that were too extravagant in the good times have little headroom to lend in the bad. Some were selling mortgages with no mark-up, using them almost like loss leaders to entice people to buy their insurance and credit cards. They still own the property if the homeowner defaults, but with around half of UK mortgages representing at least 80 per cent of the property's value, house prices only need to fall by a fifth for the banks to make a loss. In raising mortgage rates to choke off demand the banks are, for once, being prudent. Mr Brown is not. The most imprudent thing the banks could do right now would be to answer Mr Brown's call to sell more mortgages, at cheap rates, at a time when their capital base is already too weak.

Second, liquidity. The £60 billion chasm between loans and deposits doesn't seem to have worried our carefree bankers when they could bridge it with wheezes such as covered bonds. But when the music stopped last August, all the wheezes became suspect, and banks had to fall back on borrowing from each other. This was expensive, since they didn't trust each other to repay. Just as food costs more to produce when the oil price rises, loans get more expensive when the cost of money rises. The Bank of England's continued reluctance to lend to banks on the generous terms that European and American central banks are offering means that the banks that are most vulnerable to bankruptcy in the world - our own - are receiving the least help.

We need our banks to be profitable. With hindsight we should have worried when they sold their marble halls to restaurant chains, and clad their remaining branches in cheap plastic. The marble halls symbolised reliability and prosperity. When banks get flimsy, so do economies.

And it is this that Mr Brown seems only to half-understand. After months of inaction, and poor poll ratings, he is suddenly determined to be seen to get to grips with the credit crunch. Share prices are already rising on expectations that an announcement will soon be made that will dramatically improve liquidity by widening the terms on which the Bank of England will lend. That will be enormously welcome, even though it is late in the day compared with other countries.

The Government may also launch some kind of swap of mortgages for government bonds, similar to that proposed by George Osborne. If done on a sufficient scale, this would enable banks to offer more mortgages. But banks will still need to boost their capital cushions before it is sensible for them all to lower rates. Mr Brown is keen to insist that they immediately pass on base rate changes, as a quid pro quo. But that cannot happen until confidence is restored. The fastest way to restore confidence will be to demonstrate that the UK authorities are determined to resolve the crisis, rather than to score points. Until now, the biggest contrast between Wall Street and London has been the absolute conviction with which US institutions have set out to shore up the banking system, and the inertia of their counterparts in Britain.

Hank Paulson, the US Treasury Secretary, understands that financial crises are as much about psychology as economics. His call for banks to cut dividends a few weeks ago was an astute reading of the psychology of bankers who felt their commercial survival depended on flashing their wallets to their investors, even while announcing losses. His interventions are making it possible for bankers to quit their self-defeating bravado without losing face.

Gordon Brown doesn't do psychology. But on this issue, he must. The truth is that we don't need more people taking out loans they can't afford on houses that are still overvalued. We need solvent banks that lend within their means. That means - yes - solving the current liquidity crisis. But not trying to present it as some kind of policy for first-time buyers, or encouraging banks to overextend again. That would just be playing politics.

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