It is clear that the political centre of gravity has jumped violently, and that the economic textbooks need urgent revision. The situation, with private banks freezing up credit, is so serious that consideration should be give to the establishment of a state bank in order to deliver government lending targets.

A year ago such a demand from a leftwing politician would have provoked a "loony left" response. But no more; after the extraordinary self-induced implosion of the financial system, the future of the market system now rests in the hands of governments...

...One of the monetary tools used by the postwar Attlee government was the direction of bank lending...

The Post Office, having secured a vote of confidence from the government with the renewed card account contract, now needs to transform itself into a full provider of financial services. What better way to set it on this route, than to provide it with responsibility for realising the government's lending ambitions? However, if it takes a new state financial institution to deliver this much-needed lending, then so be it.

One problem with the Post Office is that Mandelson is setting it up to be privatised with a foreign buyer (part-privatised initially, but we know where that logic leads). A state bank not owned by the state would be ever so slightly problematical, besides which they already have Northern Rock. But maybe McFall is also concerned to use this issue here to repurpose the Post Office and oppose its privatisation.