We have been told today by HBOS that the credit crunch will last until at least 2010 because UK banks are reliant on a rise in US house prices before they can restore their liquidity. In effect, UK consumers are being squeezed because UK banks decided to make unrestricted high risk loans in the US sub prime market without any thought as to what would happen if the market went flat.
So will UK banks learn lessons from this in the future ? The answer, of course, is no.
UK banks have continued to pay massive multi million pound bonuses to those bank chiefs who sought out these risky investments and the banks themselves will not do anything to be more careful with their investments because the bonus systems banks employ encourage high risks in return for big gains.
What we really need is a financial services regulatory regime which ensures that UK home owners and savers are no put at risk in the future because of ill judged investments by UK banks. What is the chance of this happening ?
Since the FSA and the Treasury seemed unable to spot the heavily signposted problems that Northern Rock would have, we shouldn't hold our breath waiting.