If we are buying carpets or second-hand cars, we are suspicious. When it comes to really big decisions, such as investing our lifetime savings in pensions or where to hold our bank accounts, we ought to be equally suspicious. The old-fashioned, pre-Big Bang, pre-1986 British approach to financial services had imperfections, but it had one vital virtue: it minimised conflicts of interest in the sale of financial products.

On the stock market, jobbers (holders of securities, analogous to the carpet market dealers) were separate from the brokers (who found the best prices). In the financing of companies, the merchant banks (which underwrote new issues of securities) were separate from the clearing banks (which extended loans). In the sale of insurance, a broker would, at least in principle, try to get the best terms for clients and would place the risk with a totally separate risk-bearing company. Then, people could look each other in the eye and shake hands on a deal, and only rarely did they go to their lawyers. But that is not how matters stand today anywhere. The US may be in some sense the "best example" of free-market capitalism, but it is rotten at organising its financial sector. It has destroyed its banking system on at least three occasions and, when Congress turned down the first version of the $700 billion bail-out package, it came close to doing it again.

Much of the trouble in the US, both now and in the 1929 Crash and subsequent Depression, has arisen from so-called "bank holding companies". These contain a commercial bank (receiving deposits and making loans), an investment bank (trading and underwriting securities) and a fund management company (investing clients' wealth). In the bazaars of modern capitalism, they do everything: originating, selling, lending, buying, deposit-taking and underwriting. From the point of view of shareholders and even more of bonus-driven managers, they are excellent in the good times. Their omni-competence enables them to collect all imaginable kinds of financial income: arrangement fees, underwriting fees, advisory fees, guarantee fees, brokerage commissions, net interest income and so on, and to generate fabulous profits. Carpet dealers and second-hand car salesmen look on in envy.