Washington’s Plan A for propping up American bank balance sheets was to buy their toxic assets in the hope that this would make them less nervous about new lending. But the idea was widely criticised at the time and when Gordon Brown saved the world by injecting capital into British banks, the US Treasury decided this looked a much better strategy. It dropped Plan A and followed suit.

Hank Paulson, the outgoing US Treasury Secretary, justified the decision on the ground that by recapitalising the banks the Government got more bang for its buck. Because banks lend many times their level of capital, a bit more would go a long way. Unless, of course, it was just sucked into a huge black hole of mounting losses.

The money ploughed into banks on both sides of the Altantic has done little to get credit flowing again. The patient has been saved. But has not returned to work. Which is why we are back with Plan A. The Government has belatedly woken up to the fact that the problem is not getting the big banks to lend as much as they were before (which they are doing). They need to lend more to fill the gap left by international banks and nonbanks that have pulled out. Meanwhile many of the bad assets are turning from toxic to radioactive, as RBS’s horrendous losses demonstrate.

All of the measures announced yesterday should help. The new Bank of England facility that will buy high-quality assets from banks should boost the availability of credit, as will the implementation of the Crosby proposals for asset-backed securities.

The bad asset insurance scheme should help to underpin balance sheets of those banks that sign up. But the process will be long and laborious, not least because the Government is keen to coordinate the plan with other countries, particularly the United States.

All this is worth a try, but investors are betting that most British banks will need yet more capital and for some, such as RBS, the taxpayer is the only option.

Full nationalisation looks increasingly likely for RBS, which then could be split into a bad bank, with all the toxic assets, and a good bank that could lend unencumbered.

RBS’s new management may argue that it is unfair for RBS’s bad assets to be treated differently from its rivals. But then, thanks to Sir Fred Goodwin, it does have a lot more of them.

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