I do not pretend to fully understand high finance, but am I right in understanding that the Goldman Sachs plan combines more of the sort of exotic financial instruments unrelated to any real assets, which has caused problems. If so, it presumably only works because the Bank of England guarantees instruments which would have little or no value in a free market.

It seems to me it would have been cheaper for the taxpayer to let the bank be put into receivership or be liquidated as insolvent. It would then be right for the taxpayer to guarantee to reimburse any deposits lost as a result, as although this is beyond the limited deposit guarantee scheme I think most people would accept that the depositors had done nothing wrong.

As it is the banking sector can now see that the state will go to any lengths to preserve any banking institution; however recklessly it has been managed. This removes any incentive for banks to adopt more sensible business models.