Do banks use billions in subsidy wisely?
For me the most interesting part of the interim report of the Independent Commission on Banking is Annex three (right at the back of the book) on "cost-benefit analysis of financial stability reforms".
Among other things, this looks at the size of the subsidy taxpayers provide to big banks, through their (our) implicit promise to banks that they won't be allowed to fail.
And for the avoidance of doubt, this promise was real: at the height of the banking crisis at the turn of the year between 2008 and 2009, aggregate support in the UK for banks via loans, guarantees and investment provided and underwritten by taxpayers was around £1.2 trillion - and it is probably still a bit over £500bn.
Or to put it another way, British taxpayers did not allow any bank to fail. And any losses suffered by bank creditors were largely of a voluntary nature: they were incurred mainly when investors chose to sell their bank loans (often in the form of so-called subordinated debt) at less than par or 100p in the pound.
Here is the important point: if a lender to a bank believes that as and when a bank has difficulty repaying a debt, the taxpayer will step in and prevent default, that creditor is in effect lending to the state or government.
And, as you'll know, lending to a state or government is perceived to be one of the safest loans you could make.
The view that a loan to a bank is in fact a loan to HMG, intermediated as it were by the relevant bank, is particularly true of the biggest banks, such as Royal Bank of Scotland, HSBC and Barclays - because these banks are so important to the smooth functioning of the economy that they are deemed to be "too big to fail" (that's a phrase we've all learned to love - or not).
Which means that those mega banks - known in the jargon as systemically important financial institutions or SIFIs - are able to pay much lower interest rates when they borrow than they would have to do if there was no possibility of the state ever bailing them out.
To put it another way, if banks were perceived to be normal commercial entities, able to go bust like any other company, the cost for them of borrowing would be much higher.
In other words, taxpayers provide banks with an interest-rate subsidy - and the subsidy is disproportionately largest for the biggest banks.
That subsidy consists of the difference between the low interest rate banks actually pay to borrow and what they would have to pay if they were "stand-alone" entities that benefited from no external insurance against bankruptcy provided for free by taxpayers.
As you will recall from earlier posts, Andy Haldane of the Bank of England calculates this subsidy to have been worth around £100bn in 2009 for the giant banks alone - and £57bn per year on average over 2007-9 for all British banks.
So not a trivial subsidy. If he's right, the subsidy is significantly bigger than the annual global profits of all our big banks combined.
Unsurprisingly the banks think he has overstated the subsidy. They commissioned the consultancy firm Oxera to do an assessment.
Oxera estimated the annual value of the taxpayer guarantee at a much smaller £6bn per year. Which most of us would still see as a fair old pile of wonga - but more of a Mount Snowden of cash than an Everest.
Who's right, Oxera or the Bank of England?
Interestingly, the Independent Commission on Banking finds more fault with the assumptions built into Oxera's analysis than with those employed by Haldane.
In particular Oxera seems to make the error which so many banks themselves made in their own risk-control models in the run-up to the crisis of 2007-8 - which is to put too low a probability on the occurrence of extreme events (such as banking crashes).
And, says the commission, Oxera also places no value on the very real possibility of a bank receiving state support because of problems purely of its own making, rather than problems generated by a systemic crisis.
Making these adjustments means that the Oxera model would calculate the subsidy as being worth not far off £30bn a year, according to an economist much brainier than me.
Which would be equivalent to more than the combined statutory profits of all our big banks.
However, the commission itself isn't so precise. It says that the public guarantee for banks reduces bank funding costs "by considerably more than £10bn a year".
Now, "considerably more than £10bn a year" is a very substantial sum, in anyone's money.
So is it a useful subsidy?
If the banks deployed it to provide socially useful loans - mortgages for key workers, credit for entrepreneurs providing employment in the poorest parts of the country - most of you would probably say hooray.
If however the subsidy was pocketed by investment bankers in the form of enormous bonuses, you would probably say boo hiss.
Right now, of course, bankers' bonuses are rather more visible than banks' socially useful lending and investment.
But that's not the main argument against the subsidy.
The two strongest reasons for trying to eliminate the subsidy are:
1) that the subsidy is biggest for the biggest banks (for reasons explained above), which stifles competition and is therefore very bad for consumers (us) - since it puts smaller banks at a substantial commercial disadvantage; and
2) that if banks are able to borrow copious amounts at a rate that does not capture the proper commercial risks they take, they will tend to lend at a rate and in amounts that also do not properly capture the risks of what they do.
That second concern may well be the more important - in that we are not exactly short of evidence of banks going on a reckless lending and investing spree in the years leading up to the great crash of two and a half years ago.
And it was this lending and investing spree, the credit bubble, that was one of the more important causes of the crash that in turn sparked the worst recession since the 1930s.
So to put it another way, it would be a good thing if the taxpayer subsidy were eliminated - because banks and bankers that know they are not going to be bailed out by taxpayers are much less likely to behave in the kind of gung-ho way which could end up forcing taxpayers to bail them out (if you see what I mean).
In fact if we don't eliminate the subsidy, if we don't convert the banks like RBS and Barclays that are too big to fail into banks that can fail without the need to be rescued by taxpayers, we may find that our banks have become so big and bloated that they are too big to save.
This is not some scary bedtime story. It happened only the other day, in Ireland and in Iceland.
In both those countries, the losses of the banks were too great for their respective governments to bear - which is why Ireland has been bailed out by the EU and IMF and is why the UK and the Netherlands felt obliged to underwrite the offshore deposits of Icelandic banks.
Which brings me to the conclusion that won't be seen as cheery by all.
It would probably be a very good thing if the banking commission were to succeed in its aim of reducing the taxpayer subsidy for big banks.
But we should not pretend that it is only the banks that will feel pain if the subsidy shrinks.
Were the commission to succeed, there would almost certainly be an increase in the price of credit for all of us and a reduction in the supply.
Plainly what matters therefore, as and when that happens, is that the loans and investments which fall by the wayside are the froth of little fundamental economic value - which should happen to an extent, but can't be certain.