LAST November, when the global credit crunch was still, primarily, a simmering American problem over sub-prime mortgage alchemy, the top man at Citigroup, Chuck Prince, lost his job.

As he went off to his lavishly-upholstered comeuppance, Prince sought to justify why his bank and other big players had got themselves into such a fine mess in the first place. "As long as the music is playing," he mused, "you have to get up and dance."

Well, there were no quicksteps, let alone tangos, on show on Tuesday morning, as leading UK bankers, together with some American interlopers, emerged from Downing Street after a working breakfast with the prime minister. In the past six months, the impact of this crisis has spread around the world and taken on a much more sombre hue.

However, if some of the reports of what went on at Number 10 are to be believed, Gordon Brown was still being subjected to fancy footwork by the banking fraternity.

More expensive mortgage lending here in the UK is already hitting first-time borrowers and people trying to remortgage cheaper deals that have expired. And that is now having an impact on the market value of housing across most of Britain. Levels of consumption may well be the next victim.

With political alarm bells already ringing in his ears, Brown was apparently warned by some of the assembled bankers that, unless the government and the Bank of England get their fingers out, lots of smaller building societies could be forced to stop offering any new mortgages at all.

Such is the level of mistrust among banks who were, not so long ago, jigging away every bit as furiously as Chuck Prince, that they are not inclined to lend to each other, except at exorbitant rates. Despite the Bank of England's main lending rate being cut again, to 5%, this month, the inter-bank rate, Libor, is still stuck nearly a full 1% higher.

If things go on like this, the smaller lenders will have to pull down the shutters. The big high street banks could then capture the entire mortgage market. And you wouldn't like that, prime minister, would you?

They're a shameless bunch, bankers. They've got themselves into assorted crises throughout history. But they rarely display any humility. They'll happily crash the gears, like novice drivers, as they try to get their money machines back on track.

After that breakfast with the PM, Halifax stuck another 0.5% on the cost of its two-year fixed rate and tracker mortgages and had the cheek to suggest it was a "win-win" for the bank and its customers. But the bit of really dirty dancing that was on show at Downing Street was the banks' collective expectation that, yet again, the public purse will have to underwrite their collective profligacy.

Indeed, a deal with the Bank of England already seems to be in the making. According to Simon Ward of New Star, only some £27bn of the £108bn net mortgage lending in the UK last year found its way on to bank and building society books. The rest was funded from the wholesale money markets.

But with those markets now gummed up by mutual mistrust and sky-high Libor rates, where's the cash going to come from to satisfy mortgage demand, even if it falls by the 22% or so seen in previous housing slowdowns? You've got it. Under the deal now being fleshed out, it will come from the public finances.

Lenders will be able to hand billions in existing mortgage loans over to the Bank of England in return for shiny new government securities that can then be used to fund fresh lending to house buyers. Ward puts the funding assistance needed at around the £40bn mark.

On top of the liquidity they are already pumping into the system, Bank Governor Mervyn King and his colleagues can't come up with that scale of additional stimulus without an explicit government say-so. The big, unanswered question is what price they can extract in return.

By how much might the Bank discount existing, tarnished loans? And, further out, how tough is government going to be in strengthening the regulatory framework within which banks operate. There is plenty to go for there - from the structure of compensation across the industry to the management of risk, from how credit is rated to reining in excessive product complexity.

Do politicians, however, have the nerve to extract such a significant price? If banks, bankers and their shareholders come through this crisis feeling little of the pain, they will simply go off and find a new financial ceilidh where the Chuck Princes of tomorrow will dance themselves to another standstill.

But the fear must be that politicians are so scared of any financial crisis that begins to damage ordinary voters' hopes and so busy blaming each other for getting the country into such a mess, that the bankers - the real lords of the dance - will once more take delivery of whatever lifeboat they they think is needed.