Yesterday's show trial of bankers in the House of Commons was a waste of urgent time. It was an exercise in apologetic hindsight conducted, so it seemed, almost entirely in Scottish. Extracting parliament's favourite word, sorry, was predictably easy, and meaningless. Anyone can say sorry.

What we await is the remotest idea as to why bankers, or the institutions they represent, should still be trusted with rescuing the British economy from recession. They yesterday presented themselves as like the lame-duck carmakers, shipbuilders and steelworkers of the 1970s. They had been beaten by the market and run out of money. They wanted more. So what was new?

MPs and the public expect these people to rescue the economy from a mess, but that depends on their re-establishing credit. The sole justification for the government bailing out a bank is to protect confidence in its credit. The Northern Rock rescue in 2007 achieved that goal. A year later, when Lehmans was allowed to collapse, confidence evaporated and credit across the –banking sector imploded.

At this point a banker has no profession, let alone a role as a national hero. He is a mere receiver of debts. If you give such people a sudden stash of unearned wealth, they are duty-bound to use it to pay off their debts, not donate it to the public.

Yet each week over the past three months we have been told that billions are being provided to banks "in the hope" that it will be lent on to companies. What is this hope? It is like giving addicts heroin in the hope that they will pass it on to their local hospital. The money has gone into relieving balance sheets coated in red. It is throwing good money after bad, otherwise known as madness.

With £200bn of public money apparently available to rescue the economy, giving it to already failed institutions in such a way that they were sure to cause it to vanish was plain stupid. The Treasury must have known full well that none of the money it was supplying would go into extending credit, yet it continues to supply the money. It is as if Gordon Brown and Alistair Darling were willing the economy into deflation and depression.

MPs seem to want bankers to behave like social workers. They are not social workers, and never presented themselves as such. They are bankers, and bankrupt ones. Their retail arms have become mere money boxes.

They should have been taken into temporary public ownership, their deposits protected by the state and their commercial lending ring-fenced with public money. It happens in war. It is not that difficult.

Just as Labour opposed privatisation when it was needed, so now it opposes nationalisation when it is needed. Its ideological knickers are in a total twist. Some ministers were allegedly persuaded by officials (and journalists) that they should not "play banker". It is hard to see what else they were playing when they were devoting such huge sums of public money to bank subsidies. Why give the money if not for some public purpose?

I am reinforced in my view that the attempt to rescue the world from depression during the last six months has been based on a gigantic folly, that salvation would lie in rejecting Keynesian demand stimulus and depend instead on using public money to underpin bank speculation.

Not since the Treasury in 1720 invested £27,000 in the stock of the South Sea Company, gambling that it would relieve the national debt, has that department indulged in such massive stupidity. Money is currently being taken from consumers – which means taken from spending and thus manufacturers, services and investment – and tipped into a black hole of financial bankruptcy.

Even now, the Bank of England talks of boosting money supply to the economy by buying bonds from banks, in the repeated "hope of getting the banks to lend". The Treasury can print £1bn or £50bn and it will make no difference. Unless banks are –nationalised and directed, and financial institutions can channel public money into credit, these sums will just vanish into balance sheets.

One illustration of the present –madness was the reaction to the one basically sensible measure taken by Alistair Darling, the pre-Christmas reduction by 2.5 percentage points in VAT. This injected £12bn into demand and must have played some part in underpinning spending at that time.

Because it was boring and circumvented the banks, the VAT cut was –vilified by financial journalists and others. There was no spicy upturn in the stockmarket and therefore the reduction "did not do the trick". They would have preferred the money being given to their friends in the City, or invested in something spectacular, like infrastructure, roads or the Olympics.

That the VAT cut was swamped by adverse news did not make it wrong. But the effect of criticism was to ensure that the Treasury did not repeat such direct demand stimulus. Four times as much was promptly given to the banks, where it disappeared into Icelandic debt or sub-prime collaterals. So did the next £150bn.

As one of the journalists who appeared before this same Treasury committee last week, I was shocked at the limited range of the questioning. Like yesterday, the MPs seemed ill briefed and desperate to score points, in our case to prove that the credit crunch was somehow the fault of the press. MPs were not concerned with the real economy, only the banks and the reporting thereof.

The show trial that should be staged is not of bankers or journalists but of ministers, who have now blown £200bn of public money on a massively failed strategy for staving off recession – indeed on making it worse. Because ministers are from the same club as MPs, they are let off lightly. There will be no show trial of the chancellor.

The truth is that if anyone has slept through this sorry affair, it has been parliament. If I were the second team of bankers appearing before the Commons today, I would take a large mirror into the room and hold it up in the face of the committee. Let them see themselves in the dock for once.

What were they doing as the economy lurched to war? Perhaps they might say sorry too.