AFTER years of being told by bank managers that they were irresponsible with money and needed to save more, islanders now know the truth: the men in the plush offices are even worse with cash than the rest of us.

At least customers can be foolish only with their own funds. The high street institutions have squandered literally billions of other people’s pounds and the years of recklessness have finally come home to roost.

The package of measures announced yesterday by the UK – the second bail-out since October – was an indication of how serious, unbelievable really, the situation has become and how close the moneymen have come to collapsing the entire banking system.

But just as the institutions took unacceptable risks with sub-prime assets, the UK is also gambling that the financial strength of the country is sufficient to underpin the unquantifiable losses the banks potentially have in the so-called toxic assets they now hold.

What makes the situation all the more surreal is that taxpayers’ money will be used to write-off 90% of any shortfall that the banks incur on the loans in the event of default.

As a result, islanders will conclude that the very people responsible for the credit crunch and triggering recession are protected from the consequences of their actions because of the use of public funds. The people who provide those funds, however, are completely exposed to the job losses and home repossessions coming in the wake of the banks’ recklessness.

The other twist in this unprecedented situation is that it is the ultimately unsecured and unpaid debt that has brought the financial system to the brink yet the government’s response is to lend the banks money so that the borrowing can continue.

Yes, businesses and individuals too need credit to function, if only occasionally. Yet the experts say the level of indebtedness is far too high and has to be purged: after the party, the hangover.

For most people, however, the economic arguments are just too complex and what’s happening is actually quite simple.

Will the rescue plan work? How painful will it turn out to be? How long will it last?

In reality, we won’t know until after the event – and that makes it all the more worrying.