It's hard not reach the conclusion that greater public ownership of the UK's banking sector is on the cards, and with it may come a change in emphasis in what banks do. If some of the stories around today are on the money we might not only see RBS taken wholly into public ownership (an outcome many people expect now), Lloyds/HBOS might need more money, Barclays may also need to come back for taxpayers' money (and surely this will mean someone on the board has to go), and Northern Rock might be used as a people's bank to get lending going again. Add to this the Government's planned insurance scheme to (as far as I understand it) effectively put a floor under the value of the banks' toxic assets if necessary.
Now, as other have pointed out, the banking system always ultimately has the state as a back-up. But in today's UK the state is heavily involved in many aspects of what banks would normally be expected to do. This ranges from mortage product design (the idea of allowing people payment holidays), to lending policy, to valuation of toxic assets, to deciding on key senior bank personnel. How much further would outright nationalisation (though with the likes of HSBC and Standard Chartered presumably staying independent) really push things?
People will argue that the state will lack the skills to run banks effectively but a) I don't think HMT is going to avoid drawing on experienced private sector people to make a political point and b) anyway, look at where we got to leaving private sector genius to itself - a system that has almost destroyed itself. So we are in the bizarre situation now where what would have been regarded as a far left fantasy (a socialised banking system) is looking not only a possibility, but also an outcome which many 'reasonable' people would consider a fair one.
As I've argued a bit before, this kind of shift has serious implications in other areas. I'm already busily arguing with various people that if we have this level of radicalism in economic policy, why pussyfoot around in financial reform. For example, in the bit of the world that I inhabit the idea that shareholders are the primary constituency to be considered in corporate governance has been dominant for a very long time. But given the many flaws in an approach based solely on this way of looking at things, surely the current environment will see this reappraised? This is one of those times where you try and drag the boundaries of debate as far as possible in your direction.