First, identify the problem: it seems pretty clear that the problem is the Gordian complexity of banks' derivatives positions, particularly the credit default swaps which by my calculation now have a notional value approximately 1.75 times total bank credit. Since we have the stunning example of Parmalat to show that banks lawyers cannot in the end agree where the cashflows go when the credits on these go down, the market knows, or suspects, that there's potentially an almighty but unknowable contingent liability in practically every banks' books, and consequently are unwilling to lend to them. In other words, it's the sheer complexity of the situation that's killed the banks. Think of it as an engine, all smashed up inside: then think of the rescue package as simply adding fuel in the hope that it'll restart. It won't, because these financial institutions are broken inside.

Second, a possible solution. We need to make a clear distinction between those bits of the system that are necessary, and those that aren't. I would suggest carving out all depositors' liabilities and reincorporating them into mutually-owned money market funds, if necessary backed by government assets and/or AAA corporate paper. Being mutual funds, these would need no guarantee, and, being mutual funds, would not be running loan/deposit ratios of more than 100%. These could get on and run themselves, operating in money markets effectively without further government intervention or protection. The rest – the great coiled and Gordian knot of unentanglable claims and counter-claims on the derivatives desks of the former banks – shouldn't be bailed out, but should rather be faced with the alternative of a radical netting-off or bankruptcy. If they go down, that's just too bad – depositors won't be affected, and money markets will still operate.

Then, third, the Conservative Party could get behind the prospect of erecting in London a responsible mass-distributed post-banking system based on a myriad of money-market mutual funds offering the full spectrum of risk/reward saving opportunities, all privately owned, and all reflecting the transparent choices of their depositors/owners. To complement this, you'd need a separate company running a settlement system (Bank of England? private company running along the lines of the National Grid?); a whole new industry of credit analysts rewarded by their success at accurately measuring credit risk; and a revivified merchant banking industry doing their traditional business of sourcing and arrangeing loans from this new, safe, and diversified market.

This is a fully private-sector, 21st century alternative to the essentially 17th century form of financial organisation called 'commercial banks' – a form of organisation which is a danger to itself and the rest of humanity. It would perform the essential functions better: by cutting out the middle man and ensuring transparency it would offer both savers and borrowers a better deal.

But instead of this, it seems the Conservative Party has signed itself up to the erection of the People's Bank of Europe, in all its various forms and guises. We can do better, and should do better! Act now, vigorously, and we can secure London's lead as a financial centre in the 21st century. Carry on as we are, and someone else will do it first. . . .

And you, John, are uniquely placed to help it along. Use the opportunity!

Why should Banks be favoured in this way when other businesses are abandoned, indeed often driven into insolvency, by the government for whom insolvency proceedings are a preferred method of tax enforcement?

There is a fundamental point at issue here

"We are taking legal action against the Icelandic authorities,'' Prime Minister told journalists at a press conference at 10 Downing Street today. "We are showing by our action that we stand by people who save.''

Gordon really is (wrong-ed). The whole of Iceland is bankrupt and he is going to sue them.

Actually, I rather feel sorry for the Icelanders. Brown desperate to garner votes thinks this is the way to do it.

East Anglian Troy: "the British taxpayers, are to bail out all the cretins that put more than £50,000 into that dodgy foreign bank (Icesave) that was paying an excessive rate of interest. "

Problem is EAT. the Great British government (AKA the FSA) permitted them to operate in UK territory (so it is not B Of Timbuktu ) and once again the regulators were asleep on the job.

The FSA must be a contender for most useless organisation created by the Labour government. *WTF* have they been doing for the last ten years???