The occasional series on Britain’s real depth of doo-doo continues.

A question The Slog has been asking for some time now is how exactly (a) the banks can restore their balance sheets with 0% interest rates and no money to borrow wholesale – and (b) how the housing market can do anything other than crash further if the banks…..see point (a) again.

The FT’s economics correspondent Norma Cohen wrote yesterday that UK lenders have ‘warned that they will have to slash mortgage lending and raise rates on home loans’ if the Government really means what it says about the bailout repayment schedule. New mortgage lending (we’re told) has obscured ‘the seriousness of banks’ underlying liquidity needs’.
One wonders from whom this seriousness has been hidden (given everyone I rate knew it from the minute Darling started wittering on about the Government ‘making a profit from the temporary privatisation’) but anyway it’s good to see the media are now awake.

A page one fact: to make for a sound retail banking business, the 80% depositing customers will be necessary to finance the 20% of clients borrowing. Between 1999 and 2007, lending outstripped deposits in Britain’s retail banks by £180 billion.

Are any of the top wallies who allowed this lunacy to become the norm out of a job/ short of a pension/ in prison? The answer can be summarised as ‘no’.
But what of the Greatest Ever Chancellor bloke who gazed upon the waters of this And Saw That It Was Good?
Oh, right – sorry. He’s the Prime Minister.

PS I say the media are awake – if you think of The Observer as something quite different, which on the whole I do. As far as I can tell, the paper is largely being written at the moment by a combination of Will Hutton and Tessa Jowell. Sunday’s edition was pure gold: front page of the business section: ‘Taxpayers to make £5bn profit from saving RBS’. Within three words, the copy beneath had retreated into ‘could make a profit’. It carried on to tell us that ‘only’ £118bn of asset problems are in the UK, and plucky RBS will absorb the first £60bn of losses. The remaining poo will ‘be shared by the Government and RBS, with the taxpayer taking 90% of the losses’. Great.

The truth behind this fantasy is that the Asset Protection Agency (APA) might make £5bn profit from handling the protection and insurance side. Yes the APA is a quango, and no we don’t have – any of us – the remotest chance of ever seeing any of this money back. (And trust me, that is the top-top starry-eyed optimistic scenario)

Meanwhile,inside the main paper, Will told us that the Conservative leadership will find it hard to persuade all those baby-bayoneteers in the Shires that capitalism needs reform. I couldn’t agree more, but the headline – ‘The Tories have the answers, but not the strength to deliver’ left one wondering what Hutton thought New Labour has in the powder magazine. They’ve had twelve years to use their Third Way to reform capitalism…and done diddly-squat.
But the paper left the best until last with its Oped headline:’THE TORIES’ SUMS ON THE ECONOMY DON’T ADD UP’. The piece was pure Will from start to finish, and was so unintentionally funny I had to lie down later.