In the autumn of 2008, during the worst global banking crisis since the 1930s, I was interviewed by French television and asked to explain the malevolent role of hedge funds in causing the mess we were in.

When I said that hedge funds were really not at the heart of the matter, the interviewer was shocked and disappointed. She was in London on a mission to tell the truth to her viewers about the malignancy of hedge funds, and her script did not allow for a different version of events.

Some would say that the European Union's determination to drive through a directive regulating hedge funds and private equity is a manifestation of the same blinkered vision.

It's not that a bit of additional regulation might not be useful. More transparency about their activities, formal limits on the amount of debt or leverage they can take on, these could be sensible safety precautions, to limit their potential to wreak damage to the financial and economic system.

But there is a strong argument that proponents of the new directive are missing the big and important points by a mile. Which means that the passionate and obsessive determination of some EU members to see the directive enacted can be seen as a bit silly (at best) - especially at a time when the real flaw in the financial system, the structure and regulation of banks, is a long way from being fixed.

There are two important points.

First, the actual harm that hedge funds and private equity may have wreaked in the creation and course of the credit crunch could probably be much better tackled not by regulating them directly, but by new restrictions on the banks that service them and take credit from them, and on the financial markets where they trade.

There are five kinds of harm that hedge funds and private equity may have caused, all of which are fixable without a directive that imposes new direct constraints on hedge funds and private equity:

1) Some financial institutions, such as Bear Stearns and Lehman Brothers, became dangerously dependent on short term credit provided by hedge funds. But that's fixable by imposing tough new requirements on such investment banks to raise much more longer-term finance that can't be withdrawn on a whim.

2) Many believe that hedge funds have destabilised banks such as HBOS and even entire economies, such as Greece, disproportionately to the fundamental weakness of such banks and economies, by their ruthless financial speculation that such banks and economies were heading for the knackers. Now, to be clear, that hypothesis is by no means proven. Some would say that in such cases hedge funds are the public-spirited early warning system (please don't shoot your computer). But if you think that it's wrong to allow the mafia to take out an insurance policy on your house that delivers the mob a profit when your house burns down, which is how some would see naked CDS shorts on bank debt or government bonds, then ban those insurance policies, prohibit naked CDS shorts. But that's product regulation, not regulation of institutions such as hedge funds.

3) Hedge funds have provided a market for some of the newfangled financial products, such as CDO squareds and cubeds, that decimated the balance sheets of banks. But if you don't like the toxic new products, regulate their development or the extent to which banks can load up their balance sheets with them.

4) Banks have suffered big losses on their loans to businesses acquired by private equity firms. But that is eminently sortable by constraining banks' ability to lend to over-indebted companies and institutions.

5) Finally, the massive rewards earned by the partners in some hedge funds and private equity firms helped to encourage the spread of a pernicious short-term bonus culture in banks. But let's be clear about this. First of all most hedge fund and private-equity partners are at least putting some of their own money at risk (although some would say nowhere near enough), which almost never happens in banks. More germanely, hedge funds and private equity surely can't be held accountable for the abuse of their remuneration system by other institutions.

And then there's the humungous final point, which is the one that the proponents of the EU directive in the French and German governments simply don't wish to acknowledge. Which is that there is a powerful argument - if you believe in capitalism - that hedge funds are in one overwhelmingly important respect a model for how the banking system should be reformed, and absolutely not a financial tumour that needs cutting out.

The fact is that hundreds of hedge funds went bust over the past couple of years. And there wasn't a single one, for all the billions of dollars of investors' money they controlled, which needed to be bailed out by taxpayers.

Why was that?

Well it was probably not because of brilliant regulation by the likes of the Financial Services Authority.

The much more compelling explanation is that they were subject to the direct engaged oversight of their investors and creditors, which limited hedge funds' ability to take unaffordable risks. It never occurred to those providing finance to hedge funds and private equity firms that the state might provide them with a safety net. So those creditors and investors made sure that those hedge funds and private equity firms only speculated what they could afford to lose.

This is the important big contrast with banks, where investors and creditors knew that if everything went wrong, taxpayers would be there to pick up the bill. Which meant that those investors and creditors had less of an incentive to prevent banks from betting not only the farm but the entire landscape.

On that view, we would want banks to become more like hedge funds, not regulate hedge funds out of existence. Or to be more precise, the investment banking bits of the likes of Barclays, Deutsche Bank or BNP Paribas should perhaps be hived off and shrunk, so that there would be no reason for taxpayers to bail any of them out if they ran into difficulties.

Some would therefore argue that if the French and German governments really want to make the financial system safe, they would start by dismantling their enormous complex universal banks. The consolidating power of these sprawling banking conglomerates may pose much more of a threat to future financial stability than hedge funds.

Something remarkable may well happen on Wednesday or Thursday, which is the announcement that a former KGB officer worth $2bn (according to Forbes) is buying a pillar of Britain's free press, the Independent.

Actually to say that Alexander Lebedev and his son Evgeny are buying the Indy doesn't quite convey what's happening.

Ownership of the paper (launched in 1986 under the slogan "It is, are you?") and its £10m-per-year losses would transfer to them, but naturally they would not actually have to hand over any cash to take on this expensive responsibility.

The deal has been expected for weeks; on-off negotiations have been going on for well over a year. And those close to the Lebedevs say they hope to unveil their plans tomorrow or the day after.

That said, it wouldn't be a great surprise if there was another delay. Last week agreement was held up over what Trinity Mirror might demand if a Lebedev-owned Indy decided to remove distribution from the Mirror publisher.

My strong sense is that momentum to complete the deal is now unstoppable - although, to resort to cliché, no deal is done till it's done.

So if the Indy completes its almost 25-year metamorphosis from a bold initiative by journalists to control their own destiny into just another's plutocrat's bijou, what does that portend?

Well, as I said in an earlier note, in mundane commercial terms it could mean that there will be no charge for some or all of the Indy's circulation: the Lebedevs already give away the Evening Standard in London, and are pleased with how that has increased the reach of the paper and has helped to push up advertising revenues.

However, abolishing the cover price would not be cheap for them: the Indy's current annual revenue from circulation is about £30m, which is a lot of money to sacrifice on a hunch that over time advertising income will rise enough to compensate.

That said, the Lebedevs will not buy the Indy and be content that it remains the smallest of the so-called quality papers.

They will want to put oomph behind circulation.

Nor are they taking a conventional view of who should run the Indy. They've approached Greg Dyke, the former director general of a rather bigger organisation, the BBC, to be the new editor: he hasn't said no (although that doesn't mean he'll ultimately say yes).

So the scale of the Lebedevs' ambition is unsettling other newspaper proprietors and managers.

The Russians will be braced for fearless investigative journalism from competitor titles, examining the origins of their fortune, whether their purse really is bottomless, whether Alexander Lebedev's relationship with another famous former intelligence officer, Vladimir Putin, is as fractious as it seems (fractious would be good, according to the conventional view) and whether they are committed to free expression.

Having met them, they talk an impressive talk about their access to cash and their passionate commitment to an independent press.

But I haven't conducted banker-style due diligence on them.

Whether such due diligence is strictly necessary, given that the choice for the Indy is probably their underwriting or a lingering death, is moot.

Years ago I was on a plane with the then chief executive of British Airways - and when I mentioned this to the cabin crew, they said they knew and had already spat in his drinks.

Which is as much to say that there's nothing new about British Airways' management being at loggerheads with staff.

Any strikes will be costly - in terms of lost business and the incremental expense of providing an emergency back-up service.

But many shareholders would point out that 23 years after the flag-carrying airline was privatised, BA has failed to sufficiently modernise industrial relations. They believe strike costs would be worth it if what emerges is a BA better able to adjust staffing levels to compete with its lower cost rivals.

Which explains - in part - why BA's share price has actually risen a bit since the strikes were announced at the end of last week.

That said, BA's cabin crew are pretty determined to fight, largely because they fear that what's being forced on them is a Trojan horse - an opportunity for BA to bring in new staff over time who would work much more than they do for much less.

BA's chief executive says that his airline has sufficient cash to absorb the costs of a strike.

However, that may be missing the point. Strike-related losses would be trivial compared with the £900m fall in turnover that the group suffered in the first nine months of the year and a hole in its pension funds of at least £3.7bn.

BA is already more productive than it was, and actually made a small operating profit in the three months to the end of 2009.

For shareholders, the biggest risk for BA right now isn't financial bankruptcy but a collapse in the authority of management if it were to cave in.

Of course the corollary of that is that cabin crew have a pretty big incentive to fight on.

I had been meaning to write something about Sir Brian Pitman, the former chief executive of Lloyds Bank, who died last week, but have been delayed by the latest Lehman revelations.

Almost 20 years ago, when I was the Financial Times' banking editor, I saw a great deal of him. And I would argue that he was one of the four or five most important British business people of the Tory years of government from 1979 to 1997 - which is not to say anything about his politics, but just to point out that his heyday was the age characterised by the Thatcherite war on the state and a resurgence in the private sector.

He was certainly the most important British banker of his generation. And his single most important contribution was that he understood - in a way that previous leaders of the Big Four clearing banks and many of his contemporaries did not - that banks were supposed to be run for the long term benefit of their shareholders and that what customers wanted actually mattered.

This may today sound like a statement of the bloomin' obvious - even if most banks have recently rather failed to meet those basic standards. But 20 years ago they were revolutionary ideas: banks back then were run by public-school chairman and grammar-school general managers whose primary belief was that the size of a bank was what really mattered, and never mind if being big ran counter to the interests of the owners and the clients.

Together with his own public-school chairman, Sir Jeremy Morse, Pitman dared to be different in another way. Lloyds largely eschewed the glamourous businesses of stock broking and investment banking, and concentrated on serving the needs of retail customers.

Because of his obsession with what was at the time the relatively new concept of risk-adjusted return on capital, he could see how to make money for shareholders over the long term out of basic banking, but not out of wholesale speculative activities where the risks were harder to measure and control.

Only a few days ago, he gave a synopsis of what really mattered to him as a banker and business leader in his evidence to the Future of Banking Commission:

"Nobody is a greater believer in shareholder value than me... It's long term shareholder value and everything has to be structured around the long term, particularly the remuneration structure has to be around the long term. The minute you move to a huge emphasis on short term big bonuses you're going to change the behaviour. It is perfectly possible, in our case for 17 years when I was there, we were doubling the value of the company every three years for 17 years. Nearly everybody had shares in the company; messengers were worth a quarter of a million pounds when I left because we'd been successful as an organisation. But we believed it all had to start with the customer."

This relentless focus on doing one thing well and putting the customer first, rather than going for the glory of becoming a global universal bank, meant that Lloyds was for much of the late 1980s and early 1990s Britain's most successful bank by a mile - measured in respect of its profits growth and share price performance.

On his watch, accident-prone Midland was devoured by HSBC, Barclays suffered humiliating losses on property lending and made a very expensive debut in investment banking and NatWest lurched from mediocrity to eventual takeover by Royal Bank of Scotland.

Which is not to say he did everything right. Arguably it was a mistake that he stayed on as chairman after ceasing to be chief executive - because it was impossible that the new chief executive would have any real sunlight in which to flourish under his long shadow.

And he became so obsessed with growth, that when the natural growth to be squeezed out of the domestic retail market was largely exhausted, Lloyds probably became too hooked on making acquisitions, not all of which were sensible.

But if you want a measure of what he did right, HBOS would today be a nationalised basket case, if he hadn't transformed Lloyds into such a fearsome money-making machine that it has been able to absorb HBOS' mind-bogglingly huge losses (although many Lloyds shareholders would wish that his successors at the helm hadn't tested the bank's robustness with that deal).

Pitman was a player in the banking industry till the end.

He recently became chairman of Virgin Money and on 25 February, speaking to the Future of Banking Commission, Pitman made an important point about the financial and economic havoc wreaked by banks in the past few years that has not received enough attention: the chief executives of banks have the power to drive up short-term profits by pulling a lever that forces their respective banks to take more risk, to lend and invest more relative to their capital resources.

As he said, bosses of banks and other financial companies (such as insurers) have this unique ability to engineer increases in profits over the succeeding two or three years in a purely mechanistic way. It is not a power, for example, that a retailer has.

But after profits have been lifted significantly by the income stream automatically generated by lending and investing more, there is - usually - a horrible reckoning, when many of the loans and investments turn bad, as borrowers find it difficult to keep up the payment. Does that sound familiar?

Which is why Sir Brian was such a critic of a short-term bonus culture in banking that provided powerful incentives to bank bosses to pull that lever and increase the risk being taken by their banks.

He felt you needed 10 years to measure the success of a bank. And he wanted bankers to be rewarded for increasing profits and the share price over considerably more than three years.

Oh, and he also thought that banks ought to be run by bankers who understood all this. Although he was that rare banker who actually listened to customers, he was withering about "retailers" with little grasp of risk who had had taken over his industry and almost destroyed it.

$50bn is not a trivial sum to hide from investors, creditors, rating agencies and the US government.

Which is why the assertion by a US court-appointed examiner that Lehman used an accounting ruse to keep from public view some $50bn of loans and investments - and thus appear to be taking fewer risks than was really the case - is a serious charge.

To be clear, the examiner does not say that this device was responsible for Lehman's collapse. Its demise stemmed from its excessive investments in the US commercial property market and its dangerous reliance on short-term finance that could and was withdrawn.

However Lehman might well have collapsed earlier if the full extent of its loans and investments had been in the public domain.

Which is why it is at the very least highly embarrassing for Ernst & Young that the examiner says that global accounting firm is liable to claims for damages because of its alleged "failure to question and challenge improper disclosures" by Lehman.

And the examiner also says claims can be made against Dick Fuld, Lehman's erstwhile chairman, and a trio of its former chief financial officers.

Lehman's creditors and investors will be studying the examiner's report in a forensic way, to assess whether they should sue those criticised in the report.

Meanwhile there is also some unattractive publicity for the London law firm Linklaters and for the now controversial light-touch regulatory culture that existed in the UK till recently.

The examiner says that the so-called "Repo 105" programme that allowed Lehman to hide that $50bn of assets was not permitted by any US law firm.

So Lehman obtained an "opinion letter" from Linklaters in London that said the relevant deals were permissible under English law - and the relevant transactions that hid the assets were then conducted through Lehman's London operations.

There's no suggestion that this was illegal or in breach of any rules.

But some would say it is unedifying that the deals that buried the $50bn of assets were not permissible on Wall Street but could be done in London.

"Repo 105" is about to enter the lexicon of shameful accounting and financial techniques employed to hide risk from the markets.

According to Anton Valukas, the examiner appointed to investigate the collapse of Lehman Bros by a New York bankruptcy court, Lehman used Repo 105 to hide from creditors, markets, ratings agencies, regulators and even members of its own board quite how much it had borrowed relative to its capital.

Or to put it another way, the firm used Repo 105 to exaggerate its financial strength in 2008, which was when this really mattered because of widespread concerns about the robustness of many banks.

The ruse worked like this.

Lehman was highly and dangerously dependent on raising hundreds of billions of dollars of short-term finance every day, in what's known as the repo market.

This is a market used by US investment banks in which assets can be swapped for short-term loans.

But because the finance raised in this way has to be repaid within days, the assets - in an accounting sense - are never deemed in an accounting sense to have left the repo-ing banks' balance sheets.

Except that Lehman found a ruse to use the repo market to make it look as though the assets had been removed in a permanent way.

Apparently (and this is quite difficult to believe) the accounting rules allowed Lehman to report a reduction in assets if it exchanged those assets for funds at a conversion rate of 105 to 100: so if Lehman exchange assets with a value of $105 for loans at a value of $100, that $105 of assets could be removed from the balance sheet when reporting group financial results.

Astonishing.

Now according to Valukas, this ruse allowed Lehman to report that its assets were $38.6bn lower than was really the case at the end of the 2007 financial year. And the reduction increased to $49.1bn at the end of the first quarter of 2008 and $50.4bn by the middle of 2008.

Why did this matter?

Well, one of the most important measures of an investment bank's financial strength is its leverage ratio, or the ratio of its reported assets to its reported capital. The lower the ratio, the stronger a firm will appear to be: the bank will appear to have more capital relative to its loans and investments to absorb any losses on those loans and investments.

So by removing $50.4bn of assets from its reported balance sheet using Repo 105, Lehman reduced its reported leverage ratio from 13.9 to 12.1.

That may not sound a lot, but in the context of the fraught market conditions of 2008 - after Bear Stearns imploded - it could have been the difference between life and death for Lehman.

In particular, it was hugely dependent - as I've said - on raising short-term finance from the conventional repo market. And if its creditors in that market had known the true state of its leverage, they might have ceased lending to it even earlier than they did - which would have brought forward the date of Lehman's demise.

I'm slightly under the cosh now. But when time permits later in the day, I'll also look at why Valukas believes there is a case to claim damages from Lehman's chairman, Dick Fuld, three chief financial officers - Christopher O'Meara, Erin Callan and Ian Lowitt - and the firm's auditor, Ernst & Young.

For different reasons, he believes there may also be claims on JP Morgan and Citibank, for the way they demanded collateral from Lehman in its final days, and from Barclays, for the alleged improper transfer of certain assets to Barclays as part of its purchase of the rump of Lehman.

Now that the Red Knights have formally appointed Guy Dawson of Nomura to advise them on their plans to bid for Manchester United, there can be no doubt of their serious intent.

Dawson has been one of London's most prominent corporate advisers for 25 years. And Nomura is Japan's leading investment bank, by a margin.

So what will Dawson actually do?

Well his first priority is to interview the 50 odd wealthy individuals who've indicated to the Knights that they'd provide funds for a bid - to see if money really will follow mouth.

The sums required are not trivial.

Here's the basic maths.

The Knights would probably leave the £500m of debt recently raised by Man Utd in the bond market in place - so long as bondholders can't force them to repay (which is by no means certain).

But the Knights would want to buy out the so-called payment-in-kind notes, which is debt whose interest rate is currently an eye watering 14.25%, rising to a penal 16.25% in August.

Redeeming that debt would probably cost more than £230m.

Of course the Knights' priority is to buy out the equity in the business held by the Glazer family.

The Glazers reportedly invested $495m of their own money into the business - equivalent at today's exchange rate to £330m.

Since the Glazers aren't forced sellers, they will presumably demand a hefty premium to what they paid before they even contemplate cashing in.

Let's assume that they would think about dealing if offered a 50% uplift - which is not an outrageous gain on an investment held for five years.

That would mean the Knights would have to find £500m for them.

Rounding up, that implies that the Knights need to raise £750m in total, to buy out the Glazers and pay off the cripplingly expensive payment-in-kind debt.

Would that be a walk in the park?

Not exactly.

If in the end some 50 deep-pocketed Man Utd fans can be persuaded to stump up, each would have to provide £15m.

Which is quite a lot to pay for a lifetime season ticket.

If David Beckham were to follow up on last night's sartorial gesture of support for the ousting of the Glazers with a cheque, he might not notice any serious shrinkage in his bank balance. But even in the City of London's bonus-land, there aren't that many football supporters keen to invest that kind of sum purely for the love of a club.

Of course it's theoretically possible that Nomura will be able to demonstrate that there's lots of money to be made from investing in Man Utd at an enterprise value of £1.25bn (which is the sum of the £750m take-out price and the bond debt).

However, the profitable upside is not conspicuous, given that Man Utd's annual turnover is just £278m, or less than a quarter of the putative takeover valuation.

There is a much bigger story in the Financial Service Authority's Financial Risk Outlook than the new stress test which I wrote about yesterday.

It is that the UK's banks have to find £440bn of loans and finance between now and 2012 to replace maturing debt.

There are only three places that money can come from.

The money could come from savers in the form of a growth in deposits.

And, as it happens, we have been saving a bit more in the UK.

But if the banks' stock of lending stayed flat for the next couple of years (which looks plausible if unpleasant for our economy) and we saved at the rate of the last three months of 2009, the gap between banks' loans and deposits would still be just under £400bn at the end of 2012.

According to the FSA, we would have to increase our saving in bank deposit accounts by 12% per annum to close the funding gap, which - in the FSA's words - would "imply a savings rate far in excess of conceivable levels".

Another possible funding source are markets for asset backed securities, which closed with such calamitous consequences for the global economy in the summer of 2007.

Now, banks have again started to be able to raise money by packaging up mortgages and selling them to investors in the form of bonds; these markets are back in business.

But in order to close that £440bn funding gap, our banks would have to issue new debt in the next couple of years on a scale equivalent to the boom years of 2004 to 2006.

There are two problems with this.

First, it may not be possible.

Second, it may be highly undesirable: separate research by the FSA shows that these asset-backed securities - or at least those retained on banks' balance sheets - were the source of a staggering 70% of all losses on loans and investments incurred by 10 of the world's biggest banks (including the UK's) between the summer of 2007 and March 2009.

In other words, further instability and chronic weakness in the banking system could be the consequence of closing the funding gap by resorting to the securitisation market.

Where else could the money come from?

Well there is only one other place: taxpayers.

As it happens, over £300bn of the maturing debt that the banks have to replace is the finance provided by taxpayers to prevent them from collapsing in late 2008 and early 2009.

This taxpayer finance takes the form of £134bn of state guarantees for debt issued by banks under the Credit Guarantee Scheme and a further £178bn of Treasury bills provided by the Bank of England in exchange for banks' securitised mortgages.

If this sounds complicated, just think of it as just over £300bn of loans by taxpayers to banks, which are scheduled to be repaid by 2012 or so.

Now the clear implication of the FSA's analysis of banks' £440bn financing requirement is that taxpayers would not be able to withdraw that £300bn of support in 2012 without precipitating another banking crisis, or an economic crisis, or both.

Which means that any new government has a very difficult decision to make more-or-less immediately after the general election: should that £300bn of taxpayer support be extended?

Failure to do so would have one immediate and dangerous effect: it would encourage banks to stop lending; since the less any bank lends, the less it has to borrow, the less finance it has to raise.

But if banks went on such a lending strike, the UK would inevitably be tipped back into recession.

However if a new government rolled over that £300bn of support, that £300bn borrowed by banks would increasingly look like a long-term liability of the state; and in those circumstances there would be a stronger argument that the £300bn should be added to an already-ballooning national debt.

Which could be painful.

Finally it is probably worth pointing out that one bank, Lloyds, is much more exposed to this problem than others.

It has received £157bn of taxpayer finance via the Special Liquidity Scheme and the Credit Guarantee Scheme.

Quite how it would reduce this to nil by 2012 without closing its door to new lending is somewhat intriguing.

Perhaps the biggest cultural change since the credit crunch is that the Financial Services Authority (FSA) now takes the long view of financial history and insists that banks prepare for once-in-a-century financial catastrophes - the kind of disasters that regularly happen, but only after memories have dimmed of the preceding one.

So the watchdog's latest financial risk outlook instructs bank to make sure they have sufficient capital to withstand losses generated by the following scenario:

"A further decline in GDP of 2.3% from the end of 2009 to the end of 2011, with gradual recovery thereafter. Alongside this fall in GDP, the scenario includes a rise in unemployment to a peak of 13.3% in 2012, and allows for a 'doubledip' in property prices, with house prices falling by 23% from current levels and commercial property by more than 34%."

Now, for the avoidance of doubt, the FSA is not forecasting that the UK will re-enter recession. In fact its so-called "central" projection (what it thinks most probable) is that there will be a "V" shaped recovery, with GDP growth accelerating this year, to 1.4% in 2010 and 2.2% in 2011.

This "central" projection is no more sophisticated than the mean of professional forecasts. And they have been pretty wide of the mark in recent years.

So a prudent FSA - which wants to avoid a repeat of 2008's near collapse of the banking system - has to make sure that our banks have enough of a buffer of capital to cope with a lot worse than what economists expect.

Do Britain's banks currently have enough capital to absorb additional losses generated by a second recession and further sharp falls in asset prices?

Probably. The FSA insists they hold core tier one capital - which is basically pure equity - equal to a minimum of 4% of loans and other assets weighted according to the Basel Committee's widely criticised rules.

Right now the core tier one ratios of all our biggest banks is more than twice that. Most of them have ratios greater than 10%. Lloyds has the lowest ratio of the pack at 8.1%.

Which is not to say that they are invulnerable.

The FSA, for example, believes that the sharp falls in interest rates engineered by central banks to resuscitate the global economy may be disguising rather than solving the repayment difficulties being experienced by some borrowers: for arithmetic reasons it takes longer when interest rates are at record low levels for any borrower that stops repaying to cross the arrears threshold that sets alarm bells ringing in a bank's head office and at the FSA.

All that said, if the FSA's worst fears materialise and we enter a second recession (which plainly in the light of today's weak industrial production figures is not inconceivable), we should be worrying about other things than the solvency of our banks (although those other things, such as the credit-worthiness of the government and social cohesion, aren't exactly trivial).

Evan Davis asked me on the Today Programme this morning whether the probability that taxpayers would eventually emerge with a profit on Northern Rock implies that it was a mistake to nationalise the Rock at the start of 2008.

That conclusion can't be drawn - because the losses that the Rock has suffered over the past two years of almost £1.7bn in total were massively greater than expected by any of the possible private-sector bidders for the Rock.

All the bidders - including the Rock's own management team - seriously under-estimated the difficulties that the Rock's borrowers would face in keeping up the payments, especially on the so-called "Together" mortgages (where the combined value of a mortgage and personal loan "package" taken out by customers exceeded the value of their respective homes).

So, for example, the Rock's management team put together a bid for the bank in early 2008 based on a forecast that there would be losses of just under £200m in 2008 and then a return to profit.

In the event, the Rock has suffered losses on mortgages and loans going bad in excess of £2bn over the past couple of years - or five times more than the Rock's management and other bidders for the bank expected.

So if the Rock had been kept in the private sector, the capital of the bank would have been wiped out. And nationalisation would have been merely postponed rather than avoided.

What's more, even if there hadn't been a formal transfer of the equity to the public sector, this bank was on life support from taxpayers - with around £30bn of taxpayer loans at the peak and a formal state guarantee against losses covering its entire £100bn balance sheet.

Which means that keeping it in the private sector, in the sense of ownership of the equity, would have been something of an accounting charade

In fact, some would say that if there's eventually a profit for taxpayers from taking full control of the Rock, that would be a vindication of the decision to nationalise - for two reasons.

First, that the business would arguably have haemorrhaged more without the explicit backing of the state.

Second, and more importantly, the nationalisation of the bank has permitted an exceptionally efficient reconstruction of Northern Rock with regard to its additional capital needs.

This reconstruction involved splitting the Rock in two: as of this year, there exists a new smaller retail bank, with just £10bn of mortgages on its books and £19.5bn of retail deposits - making it one of the most prudently financed banks in the world - and an "asset manager" which holds some £50bn of older mortgages.

The retail bank, called Northern Rock, will be privatised, probably later in the year. And the asset manager will stay in the public sector.

That asset manager will no longer take deposits. So it requires less capital to underpin its assets as a cushion against possible future losses.

This is a long-winded way of saying that net new investment by taxpayers in Northern Rock since privatisation will emerge at around £1.6bn in total - which is the amount that taxpayers would have to get back to avoid making a loss on the nationalisation.

Is it conceivable that £1.6bn could be raised from the combination of the privatisation and the repayments over many years of the mortgages held by the nationalised asset manager?

Yes, that is possible - if not inevitable.

But it will be years before we know.

Which is not to say that there are no more difficult decisions on the Rock for whoever forms the next government.

The most tricky will be whether maximising proceeds from privatisation is paramount.

There are plenty of voices - especially in the Rock's North East home - calling for the new Rock to become a mutual once more, a vanguardist for a new generation of conservatively managed building societies.

The appeal of creating a new super-prudent, customer-owned savings-and-loans institution would be obvious to many - except that if the Rock were mutualised rather than sold, taxpayers would probably end up suffering a loss.

Northern Rock, the nationalised bank whose collapse is most closely associated with the onset of the credit crunch, is almost out of hospital.

In formal accounting or statutory terms, it actually made a profit in the second half of 2009.

But there were a couple of big one-off credits that flattered the bank - including a refund of £350m of supposedly penal interest rate charges levied by the Treasury, following approval of the Rock's rescue by the European Commission

In underlying terms, there was a loss of £139m from July to December last year and a loss of £383m for the year as a whole.

Which looks very good compared with the stonking loss for 2008 of £1.3bn.

Costs have been reduced by almost a third, and the confidence of depositors seems to have stopped eroding - even though the Treasury has announced that it will no longer guarantee their savings in a formal sense.

The bank has now been split in two, with some £50bn of mortgages to be retained in state hands and a small retail bank to be put up for sale, probably in the second half of the year.

There's even a fighting chance that, as and when that bank has been sold and the older mortgages have been paid off, taxpayers could end up making a profit on this most fraught of nationalisations.

There is a comprehensive account of the government's diagnosis of what went wrong with the financial system in a speech given last night at the Smith Institute by the City minister, Lord Myners.

It doesn't contain anything particularly new. But, as it happens, I don't recall any minister attempting this kind of overview.

Myners makes three substantive points:

1) Markets are a good mechanism for distributing capital, goods and services, but not a perfect one - so we must recognise that those who worship a deified perfect market are worshipping a false god;

2) It's unfortunate that wholesale and professional lenders to the likes of Royal Bank of Scotland and HBOS, and even providers of putative risk capital, were bailed out by taxpayers - because it proved that these banks could behave irresponsibly and more-or-less get away with it, thus undermining any incentive for them to behave more responsibly;

3) There has been a systemic, long-running failure of institutional investors to exercise their ownership rights over companies in a rational way, to prevent those companies - especially but not exclusively banks - from taking actions that damage the interests of owners.

To most of which - I would guess - there would be a wide degree of assent, from the leaders of the opposition parties and from many of you.

But beyond the bloomin' obvious - such as that banks must be forced to hold considerably more capital to protect against losses and to increase their stocks of genuinely liquid assets as insurance against runs - we are still a long way from consensus on the appropriate prescriptions.

On the issue, for example, of how to make sure that banks don't take crazy speculative risks now that it has been proved beyond doubt that taxpayers will bail them out, Myners makes slightly contradictory suggestions - though it's probably wrong to single him out for criticism, since these contradictions are inherent in most of the remedies suggested by assorted governments.

First he extols the virtues of living wills, or a proposed new obligation on all banks to have detailed, practical plans to hive off their retail operations in a crisis. The aim of such measures is to prove to the world that only those retail bits - which look after the vital interests of households and businesses - would be bailed out by the state in a crisis.

The hope would be that banks' more speculative activities - their investment banking operations in the main - would be seen by their creditors as inherently more risky. And that these creditors would have a powerful motive to prevent those banks taking dangerous risks.

Which is good in theory. Except that if a Goldman Sachs or a Barclays Capital went kaput today, it is inconceivable that it would not cause horrific contagion, both to other financial institutions and to the economy (if for example asset prices collapsed or the rug was pulled from under important non-financial companies).

So unless and until these investment banks can be massively shrunk in respect of size and scope, there would probably still be state protection for the more speculative activities of universal banks such as Barclays or Royal Bank of Scotland.

So Myners and the British government also favour some kind of Obama-style insurance fee to be paid by banks, such that the costs of any bailout would be met by bank and their owners, not by taxpayers.

But there's a problem with creating a blanket insurance scheme of that sort: it would provide an unwelcome new incentive to unscrupulous banks and bankers to take crazy risks in pursuit of short-term profits and bonuses; if the bankers' bets went wrong, the insurance scheme would pick up the tab.

In other words, bank insurance schemes re-import to the banking system more-or-less the same moral hazard problems as the free insurance that has been provided by taxpayers (without our assent or knowledge) to too-big-to-fail institutions such as Royal Bank and HBOS.

And, by the way, the Bank of England has demonstrated the financial benefit of that free insurance to big banks: over an extended period, they were able to borrow more cheaply than smaller banks perceived by creditors not as inherently more likely to fail, but as less likely to be bailed out by taxpayers were they to get into trouble.

As for what the former fund manager Myners has to say about how shareholders can become more diligent and wise stewards of companies, here he makes a point that was largely ignored in the recent furore over Kraft's takeover of Cadbury - which is that it is the acquirer of a company and that bidding company's owners that are more often damaged by a takeover than the target company.

Think RBS and the rump of ABN, which RBS bought in the autumn of 2007. RBS and its shareholders were seriously poisoned by the deal. ABN and its owners should forever be profoundly grateful that RBS's board put aspiration for global domination ahead of commercial common sense.

Here's the relevant nannyng point: Britain's code on takeovers and mergers was created primarily to give protection to shareholders in the biddee not the bidder.

It is designed to ensure that a biddee's shareholders are not prevented from entertaining a full and proper takeover offer by the selfishness of blocs of minority shareholders or the fear of the biddee's management that they'd be out of a job were the deal to go through.

But if in the end it is the bidder which suffers more often than not - through having paid too much in an acquisition or through having bitten of way more than can be chewed and digested - perhaps it is shareholders in the bidding company which deserve a bit more protection.

This of course will be at the forefront of the minds of the Prudential shareholders today, as they agonise over whether to support the Pru management's record-breaking $35.5bn offer to buy AIA.

The prime minister has chosen today's International Women's Day to argue that there's a strong case for obliging private-sector companies to report annually on the progress they're making in promoting women to senior executive and non-executive position.

It is certainly striking how few women are on the boards of the FTSE 100: just one-in-ten board directors are female; which means that companies with as many as two women directors are the exception.

And, of course, female chairs and chief executives are harder to find than even women editors of newspapers or broadcasting "on-air" editors who aren't men (that's a big hello from me).

Now there is a case - which I put last July before it became fashionable to do so (see my note "Why men are to blame for the crunch") - that the absence of women from the top of banks and financial companies meant that the atmosphere of board rooms during the bubble years was heavy with testosterone; and the consequence was a culture of dangerous risk-taking in the macho pursuit of short-term profits and bonuses.

You may dispute that. But even if you do, you surely can't believe that entrepreneurial, wealth creating talents reside exclusively in the Y chromosome. So the dearth of women at the top must surely be depriving the UK of incremental income at a time when we need every penny we can squeeze to pay our way in the world.

But if companies will be forced to produce a report card on their efforts to make their senior management team look a bit more - in a gender sense - like the world rather than a dusty gentlemen's club, it's perfectly reasonable to examine Gordon Brown's record.

I don't mean in respect of the civil service or the cabinet, although both areas of government remain a long way from gender equality.

So if for example you look at the senior positions in the Department for Innovation and Skills, which is co-sponsoring today's "business must be less sexist" initiative, the secretary of state is a man, the permanent secretary is a man, there is one female minister out of ten, and there are just two women among the 11 most senior officials.

BIS's annual report card on promoting women might say "must try harder".

And, before you attempt to turn the tables back on me and the BBC, I should point out that almost all the senior management posts in the bit of the BBC where I work, BBC News, are filled by women - including the top job, Head of News, held by Helen Boaden (who - oh yes - reports to two men, the deputy director general and the director general).

However I'm more interested in how the government has exercised its clout over those bits of the private sector where it can more-or-less instruct boards to do as it says: I'm talking about the government's gender record as 100% owner of Northern Rock, 84% owner of Royal Bank of Scotland and 41% owner of Lloyds.

All of these organisations have seen the departure of their chairmen and many board members since the state took its big ownership stakes in them as part of rescuing them from collapse.

So are these three nationalised or semi-nationalised banks now run by a new generation of female bankers? Are there more women on their boards than at comparable businesses?

No and no.

The new chief executives at the Rock and RBS: men. The new chairs of the Rock, RBS and Lloyds: men. The vast majority of board members of all three organisations: men.

All three banks are playgrounds for ageing white men just like me and the prime minister. The Rock has one woman on a board of eight. RBS has one woman on a board of 12. Lloyds has one woman on a board of 14.

Which is why there are some who are bound to argue that Gordon Brown should get the gender mix in order in his own house, before preaching to the rest of the private sector.

How much will the super-tax on bonuses raise for the Chancellor?

The FT this morning says £2.5bn gross and £1.5bn net; the net figure is the difference between the gross amount and what he would have raised from existing income tax on bonuses that would have been bigger had it not been for the super-tax.

So it's the net figure that matters. And that £1.5bn compares with a forecast of £550m made by the Treasury when it launched the one-off bonus tax in the pre-budget report last November.

Is the FT right?

Based on some calculations I did yesterday, it is plainly in the right ballpark - although the Treasury believes that it is erring on the high side.

The bigger bonus-paying UK banks - HSBC, Barclays and Royal Bank of Scotland - say they will collectively pay £668m (which implies, just to remind you, that their total bonuses to UK resident staff are £1.3bn, or just a fraction of the total bonuses they are paying).

What of the bonus tax being paid by overseas banks with employees based here for tax purposes?

Well I've spoken to executives at JP Morgan, Goldman Sachs, Morgan Stanley, Merrill Lynch, Credit Suisse, UBS and Deutsche. And I come up with an aggregate figure for them of £1.8bn.

Which would take the gross figure to within touching distance of £2.5bn - taking no account of proceeds from smaller banks.

However I don't have the information to assess how much the Treasury would have received from bonuses if it hadn't imposed the tax. We know that some banks have shrunk the bonuses they pay in the UK to reduce their liability to the 50% levy, but we don't know HMRC's original bonus pool forecast.

That said, it is blindingly obvious - as I've been saying almost since the tax was launched - that the Treasury's £550m prediction was ludicrously low.

PS It is something of an open secret in the City that British based bankers who have taken lower bonuses this year to spare the blushes and fiscal pain of their respective employers have been given unambiguous nods and winks that they'll be seen right in the next bonus round.

What a comfort!

The government, the Tories, the Lib Dems and the European Commission all say they want it: that's to build a more competitive banking market in Britain from the devastation wreaked by the bulldozing credit crunch.

What I've learned is that first steps have been taken in this direction with the formal launch by Royal Bank of Scotland of the auction of Williams & Glyn's, the small business and retail bank it is being forced to sell by the Commission.

The sale memorandum has been sent by RBS's financial adviser, UBS, to possible purchasers. And initial bids are due in April, before the most likely date of the general election on 6 May - though completion of the disposal is unlikely till after the election.

In respect of the rehabilitation of wounded Royal Bank, the sale will not be very material. According to bankers, proceeds may be around the book value of what's being sold, or possibly even a bit less, so perhaps a billion pounds or so - which would be a drop in the ocean of RBS's 2009 operating losses of £6.2bn.

But in respect of competition in the banking industry, the deal is potentially more important.

RBS is selling a business with 318 branches, about £20bn of loans and other assets and 2% of Britain's retail banking market - which is not huge, but not irrelevant either.

Perhaps what is most important is that 70% of the assets are loans and credit provided to small and medium size businesses, which is the part of the market where - many would say - competition is particularly inadequate.

The remaining 30% is credit provided to households.

So who is going to bid?

Well the two banks that seem most enthusiastic are Santander and Sir Richard Branson's Virgin Money.

And of the two, Santander can obviously afford to pay more, because it would be able to reap sizeable cost savings from the takeover thanks to its substantial existing presence in the UK.

Virgin, however, would argue that it would increase choice and competition in Britain more than Santander would do - for the obvious reason that it isn't yet a substantial player in British banking.

What's relevant in that context is that Santander was originally on a list produced by the Commission of big banks that would not be acceptable buyers of Williams & Glyn's, because sale to them would not promote competition.

However that draft list was eventually ditched and replaced by a market share threshold for bidders: the combined market share of a bidder and Williams & Glyn's mustn't exceed 15%; and Santander just limbos under that bar.

That said, the natural buyer of Williams & Glyn's in many ways would be National Australia Bank (NAB) because its British branches in Scotland and the North East would dovetail beautifully with Williams & Glyn's in the North West and Scotland.

And if NAB enters the fray that would introduce some tension in the bidding process.

But bankers tell me that NAB may well decide to sell its UK operations, Clydesdale and Northern, possibly to Santander - which would rather stymie Royal Bank's disposal.