We are taking "the unprecedented action necessary for unprecedented times", said Gordon Brown yesterday, after he and his Chancellor, Alistair Darling, had announced details of that whopping £37bn injection of state capital into three of our leading banks.

Without such near-nationalisations, two of them, Royal Bank of Scotland and HBOS, would almost certainly have suffered a run on their remaining reserves and been plunged into insolvency. Their share prices could scarcely have taken much more of their recent hammering.

Between them, RBS and the Bank of Scotland arm of HBOS can boast nearly six centuries of illustrious Scottish banking history. The Bank was founded in 1695, the Royal in 1727. Not so long ago, RBS claimed to be the fifth-largest banking force on the planet. Such has been the ferocity of the global financial firestorm, however, that the reputations of both have been reduced to ashes in the space of a few months.

Let's get one thing clear. Our banks have not been brought to their knees by market spivs or extraneous political action. They have, in large measure, called this tragedy on their own heads. They turned the traditional business of deposit-taking and prudent lending into a leveraged house of cards, fuelled by increasingly grotesque reward systems based on short-term performance.

They traded in opaque and complex financial instruments few of them, even at main board level, really understood. They took business risks which, when a measured history of this crisis comes to be written, will be judged reckless in the extreme.

In the early 1990s, one former governor of the Bank of Scotland, Sir Bruce Pattullo, told me repeatedly: "Banks are not in the risk business." Those now being forced to resign as a condition of this extraordinary state bailout could not say that and keep a straight face. Early in 2007, over lunch on the Mound, the current boss of HBOS, Andy Hornby, told me and a colleague that building market share in UK mortgages - even on larger and larger earnings multiples and increasingly stretched loan-to-value ratios - was, effectively, a one-way bet, as the unmet demand for houses was still so great and would be with us for many years.

The other defining characteristic of this generation of banking CEOs, who have now brought their increasingly debt-fuelled edifices crashing down, was their shared belief in the virtues of ever-more-gargantuan corporate scale. Those who have brought us to this sorry pass were at one in their self-belief. No matter how big their empires, they had the skills needed to keep the machine from going off the rails.

It is perhaps no coincidence that many are not lifelong bankers. Andy Hornby is a Harvard MBA who worked in cement and at Asda before bringing Howard to HBOS's customers. Sir Fred Goodwin is a lawyer turned accountant who first made his name as one of the receivers of a failed bank called BCCI. Sir George Mathewson, Sir Fred's RBS predecessor, started life as an electrical engineer before working in finance for industry and running the old SDA. I doubt any of them would agree with the Pattullo maxim about banks not being in the risk business.

In 1981, the Royal had to be saved from itself and its belief that bigger is best by a tartan backlash and intervention by, among others, Margaret Thatcher's Scottish ministers. RBS had wanted to throw in its lot with Standard Chartered. But when the Hongkong and Shanghai Banking Corporation tried to gatecrash the deal, political pressure was summoned up to save the day.

For a time thereafter, most notably when they faced financial crisis in the wake of the early-1990s UK recession, the major Scottish banks were content to try to grow organically. But as the decade rolled on and control of inflation brought in an era of much cheaper money, their narrative once more became growth by acquisition at almost any cost.

We forget it was the Bank of Scotland, under the leadership Sir Peter Burt, which first tried to snare the struggling NatWest, only to be out-manoeuvred late on in that battle, by the Royal, under Sir George and Sir Fred.

But rather than seek solace in its own independence, Bank of Scotland immediately threw itself into the arms of the demutualised Halifax, ceding executive control to the former building society. There might have been a better deal to be had, it is said, with the internationally focused Standard Chartered, Royal's preferred suitor of 20 years before.

But it was not to be. Despite market misgivings the Royal acquired business after business, culminating in the audacious three-way break-up bid for the Dutch banking group ABN-Amro. History is also likely to judge that RBS and its partners, Santander and the now-collapsed Benelux banking group, Fortis, paid way over the score for ABN.

The banking crisis which started in 2007 with the unravelling of sub-prime mortgages in the US rapidly mutated into a global cataclysm, as banks all over the world realised that the toxic debt riding on millions of poor people's homes over there had become impossible to value sitting on their own balance sheets.

The history of banking is, in part, a chronicle of crisis after crisis. But this dwarfs all those from before. This is the first banking crisis of the globalised age. It may have started with poor Americans duped into taking out variable-rate mortgages they couldn't afford when the rates went up, but the alchemy which turned that into AAA-rated securities has polluted a global financial system and put jobs, savings and businesses everywhere at risk.

Politicians helped make all this possible, but the age of irresponsibility did not start with Gordon Brown in 1997. Any honest assessment would surely weave in the earlier drive to deregulate and globalise financial markets, which started with Margaret Thatcher and Ronald Reagan in the 1980s. They talked about Big Bang, but had a different explosion in mind.

Government intervention on the scale we have witnessed in recent weeks became inevitable when today's banks, even those behemoths of recent construction, had a collective failure of will to sort out their own self-inflicted problems. As realisation dawned, they resorted to fear and loathing of each other, fearful of what horrendous liabilities others might be masking on their balance sheets.

They refused to lend to each other. That drained all lubrication from their over-leveraged operations. Long-term investors dumped stock from the most vulnerable banks and walked away. Savers' deposits and business lending were increasingly at risk. Something had to be done and only governments and central banks could break the log-jam.

What happened yesterday will not only change banking - it has the potential to transform politics too. Gordon Brown was dead in the Westminster waters just a few weeks ago. Now the newly Nobel prize-winning economist Paul Krugman has been moved to wonder in his latest New York Times column: "Has Gordon Brown saved the world financial system?"

Krugman claims Mr Brown and Mr Darling have "defined the character of the worldwide rescue effort" with others playing catch-up. When David Cameron said yesterday was not a day for "triumph", was he thinking of the electoral battle to come or how government has acted to bring banks back to their senses?