"And there's a further risk in its decision to create the vehicle for owning the bank stakes as a formal Companies Act company. "

From Robert Peston on BBC, a description of the company managing the government's bailout investments:

"The great fear in the City about the Treasury taking stakes in three of our biggest banks is that this partial nationalisation will turn them into non-commercial public services.

No bad thing, some might say.

But it's not what the chancellor and prime minister want.

So they are putting the shares that will be acquired for taxpayers in Royal Bank of Scotland, HBOS and Lloyds TSB into a new company that will be owned by the Treasury, but will be managed at arms length."

So this new company owned by the government will manage these investments. Their job:

"And his job will be to force the banks to:-

• continue lending to homeowners and small businesses,
• to prevent the banks senior directors from being paid more than is deemed to be fair and appropriate, and
• to make sure that the banks grow their profits in a sustainable way.

Is there a contradiction between the Treasury's determination to sell its shares at a profit as soon as possible and its insistence that the banks must keep the lending taps open as the economy contracts, with the attendant risk some of the new loans will go bad?"

The key to this plan is government divestment in my opinion.

"In fact, what the Treasury has dubbed UK Financial Investments Limited will end up as one of the biggest bank holding companies in the entire world."

This is acceptable only as an emergency measure. The plan's success will depend on its cost and speed of government divestment, as well as whether it actually accomplishes what its creation is supposed to accomplish. Namely, providing credit in a credit crunch.

Superficially this looks like TARP, only with more of a directed focus and plan.