Nobody who has had any dealings with bankers would deem them worthy of great sympathy. So those among us with the odd £50 billion to spare wouldn't put down-on-their-luck bankers on the top of their charity list. Yet the Bank of England is tossing our money into their begging bowls.

Market purists like me don't usually support bailing out failing industries at the taxpayers' expense. Yet the blame for our present mess cannot be pinned on the greed or profligacy of bankers. It lies squarely at the doors of governments. It's for them to fix, and the Bank of England's extraordinary move in swapping bank assets for £50 billion of government-backed bonds is probably the right one.

There are certainly dangers. Ministers are playing down the whole thing as just a book-keeping change that leaves taxpayers with “no risk”. But when the Bank of England swaps nice, secure Treasury bonds for slightly iffy mortgages, I can't believe that our money is safe as houses. The whole point is to give the banks something solid to trade on, instead of the dross they have right now.

The Lib Dem spokesman Vince Cable put his finger on another danger, with his pithy complaint that we cannot have a situation where “the banks are able to privatise their profits and nationalise their losses”. If bankers know that governments will always bail them out, how do you possibly expect them to act more prudently?

Of course, nationalising losses is what governments do. Look beyond Northern Rock. Remember all those loss-making coalmines, car plants and steel mills that taxpayers had to prop up? But there is a big difference between letting a steel mill go bust and allowing the entire financial system to collapse. It underpins every business. If the financial authorities had done nothing while American banks went broke and we queued outside Northern Rock, the financial collapse could have left us all on the long-term unemployment rolls. When an entire economy is wrecked, it can take decades to rebuild it.

These days, banks are huge. If a big name failed, it would be an enormous catastrophe. The Bank of England rightly doesn't want to risk that. So why exactly are banks so huge these days? Here we come to the ultimate cause of this crisis - governments. The authorities' very anxiety to keep customers safe has made them introduce more and more detailed and onerous regulation. The only banks that can afford to deal with this bureaucracy are the big ones. Regulation has made the banks fat - and their customers complacent. It would be much healthier if the banks were competitive and customers eyed them up more carefully before trusting them with their savings.

Indeed, not even the regulators themselves seem able to see the wood for the trees these days. The market knew that Northern Rock was taking some big risks, but all this complex regulation seemed unable to stop it. Some old-fashioned, simple rules on reserve requirements might have done the job better.

Certainly, some bankers have sailed close to the wind, taking risks to get new business. And when things are booming, that is a perfectly rational strategy: when nearly all customers are getting richer, grab as much as you can. But governments simply added to the frenzy by keeping interest rates low for years. Politicians and central bankers love it when things are booming. But cheap credit is a heady drug. You need more and more of it to get the same high. Before long, you run out of cash and then the hangover begins. It's the politicians, by creating the boom that encouraged us all to borrow too much and made bankers lend us too much, who are ultimately responsible for our financial hangover today.

Central bankers have responded by giving us a hair of the dog - lowering interest rates to keep us liquid. Some market ultra-purists say that's a bad idea, that letting us go cold turkey will encourage us all to be more careful next time.

The problem, though, is a lack of confidence that we can pull through. The Bank of England is quite right to get us through that confidence crisis. We all know that it's not setting up precedents for the future. Once we're back on our feet, we all know that the rules will have to be rethought.

In all the discussion of the American sub-prime mortgage market, few people have pointed out that the US Government actually compels banks to make loans to poor people in poor neighbourhoods, regardless of financial prudence. It started with the Community Reinvestment Act of 1977, which aimed to support community groups, but in 1995 the Act was beefed up to give regulators far more powers to punish banks who refused lending to poor neighbourhoods - so-called redlining - because they considered the risks too high. As a result, sub-prime loans mushroomed in the late 1990s, and now the whole world is suffering the consequences.

In Britain too, the banks have been discreetly encouraged to follow the politicians' agenda and take their loans and mortgages into neighbourhoods they would normally run a mile from. The Government wanted them to form a “universal bank” to provide service for all customers, rich and poor (and good and bad). Even now, with house prices sinking, it's astonishing that Gordon Brown is extolling the merits of home ownership to get more people into it. Well meaning, but would you call it prudence?

It's governments, not careless bankers, who got us into this mess. Those who caused our problems owe it to us to try to get us out.

Eamonn Butler is author of The Best Book on the Market: How to Stop Worrying and Love the Free Economy, published this week

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