Brown hasn’t got much left to throw at the market

The Prime Minister’s latest measures to shore up the banking sector will not be his last, says Martin Vander Weyer. But the market is losing patience with the government’s interventions

There is a passage in The Siege of Krishnapur, J.G. Farrell’s novel about the Indian Mutiny, in which the defenders of the British residency, having exhausted conventional munitions, load their remaining cannon with anything sharp-edged that comes to hand. In a scene of surreal carnage, a last wave of mutinous sepoys are then mown down by a volley of fish knives, sugar tongs and marble fragments chipped from an allegorical statue called ‘The Spirit of Science’ — which had hitherto symbolised the senior British officers’ attachment to rationalism.

That seems to be roughly the point we have reached in the siege of the British banking system. Except that we have no way of knowing whether this week’s desperate package of additional measures will turn out to have been a decisive improvisation by Captain Brown and Corporal Darling — who clearly abandoned rationalism some months ago — or a futile gesture before their mutinous foe overwhelm them. That enemy who once seemed to be on their side is the market; and it is terrifyingly unpredictable, because it has no commanders but almost unlimited reinforcements.

If and when the next attack sweeps in — it may have come by the time you read this — it could drive the shares of several banks to worthlessness, forcing the full-scale nationalisations the Treasury has been desperate to avoid and has no real idea how to manage. Or, as was foreshadowed at the beginning of the week by rumours of an imminent downgrading of British sovereign debt, it could radically increase the cost and limit the scale of government borrowing — throwing Brown’s trillion-pound rescue strategy into utter disarray.