The government's stake in Lloyds will reach 77 per cent once it converts into ordinaries its existing holding of ￡4bn of prefs and the ￡15.6bn of new B shares it will receive as “payment” for the insurance policy just agreed. The state's economic interest will be higher still, since the B shares will receive dividends worth 125 per cent of those payable to ordinary shareholders. By some measures, Lloyds is in fact now in worse shape than Royal Bank of Scotland. Whereas RBS asked the government to cover losses on loans and other receivables accounting for 15 per cent of its assets, Lloyds has had to insure nearly a quarter of its balance sheet.

Of the insured ￡260bn backstopped by the UK, no less than 83 per cent derives from HBOS. How Sir Victor Blank and Eric Daniels, chairman and chief executive of Lloyds, managed to miss this in even rushed due diligence is astonishing, given that Lloyds was competing in much the same markets: the vast bulk of the insured assets relate to UK mortgages, commercial property and corporate loans. Shareholders can holler for heads to roll all they like. The reality is that the government now controls the bank. For as long as it believes sacrificing Sir Victor and Mr Daniels would be interpreted as a recognition of its own bungling, they will stay.