His logic is sound: governments of whatever colouration would want the banks to be more supportive of small and medium sized businesses. But for all the talk of a hard line the nice Dr Cable will be asking banks to amend their lending decisions in line with his policy objective. I guess this was what Charlie Kennedy meant by "tough liberalism". But surely someone of Vince's intellectual calibre cannot be naive to expect them to fall into line on his say so: the previous government's pleas to moderate bankers' bonuses fell on deaf ears, despite being saved by the tax payer and having enjoyed years of light touch regulation before that.
And yet another mechanism is available to Vince. The government owns Northern Rock and holds controlling shares in RBS. It is also a significant minority shareholder in the mammoth Lloyds Banking Group, which owns HBOS. Because of New Labour's embrace of neoliberal dogma even the nationalised Northern Rock was left to its own devices: the thought never occurred to the previous government to use its not inconsiderable leverage to get lending moving again. While the banks owned in part or full by the state do not have a controlling share of the UK loan market, they have enough clout to shape it. If the government used its shareholdings to enforce its will on RBS and Lloyds and directed Northern Rock to commence lending other banks would inevitably follow.
But this is the last thing Vince is likely to do. We might have "new politics" but we're stuck with the "old economics". As a confirmed Orange Booker he's even more wedded to neoliberalism than Brown and Darling and will fight shy of the substantial economic clout the state possesses. He might worry direct action could unsettle already volatile stock and currency markets, but then again they might be encouraged to see the UK banks come out of its credit freeze and start moving the economy again. For instance, Spain's austerity measures will damage prospects for growth and worsen its deficit, even though the slashing and burning of public services are supposed to bring borrowing down. And its reward for going along with neoliberal commonsense has been a downgrading of its credit rating. The reverse can also be true: markets might see a little bit of firm state intervention as a good thing.
In the meantime, the dithering of Vince and his ConDem friends is keeping hundreds of thousands on the dole.