The financial crisis has encouraged all sorts of ancient anti-capitalist ideas to re-emerge like long-buried monsters from the swamp in some 1950s horror movie.

The Observer’s Ruth Sunderland made a great fuss yesterday about a report by “experts” – the newspaper’s term –  from Manchester University’s Centre for Research on Socio-Cultural Change (CRESC). This called for the Treasury to grab the lion’s share of the revenues that most investment banks distribute to staff, and appoint a retail regulator advised by small firms and trade unions to impose social obligations on banks. Ms Sunderland, while recognising that the report does not have detailed solutions to offer, nevertheless applauds its conclusion that a sustainable and useful financial sector needs to be smaller, simpler and “less lucrative for the elite”.

A look at this report shows that the “experts” are an odd crew of professors of government, geography, and innovation, and trade unionists and NGO reps. Their proposals, which draw on little evidence or meaningful economic analysis, could have been taken from the Tony Benn era of thirty-odd years ago, when state direction of investment was loudly advocated. Interestingly, the CRESC is funded by the Economic and Social Research Council to the tune of £3.7 million. Its mission is to “provide an integrated programme of theoretically directed interdisciplinary empirical research on social change.” In this self-styled “public interest” report it seems to be straying into publicly-funded politics pure and simple.

In the same edition of The Observer, Chief Secretary to the Treasury Liam Byrne is reported as considering introducing a UK version of America’s Community Reinvestment Act (CRA). This notorious Act, which led to US banks lending huge amounts to high-risk businesses and homebuyers in run-down areas, is widely held to have been implicated in the sub-prime imbroglio. Mr Byrne is aware of this, but is still interested. Almost laughably, though, he says he is still seeking hard evidence that particular communities are being frozen out by the financial institutions. In other words, he has what he thinks is a solution – all he needs now is a problem.

I don’t mean to be unkind, but just at the moment the financial sector – this huge disparate mix of everything from building societies to Islamic banks, from insurance companies to hedge funds, providing employment for almost a million people – is prey to all sorts of crackpot ideas dredged up from the past.

Those who surely know better – Gordon Brown, Alistair Darling, Adair Turner and George Osborne – should zap them down now, before they cause real damage by driving away mobile bankers and institutions. If implemented, schemes like the CERSC and neo-CRA proposals would cause one heck of a mess. The cost would not be borne simply by previously overpaid dealers as naive critics seem to suppose, but by much humbler employees, by our pension funds, by the taxpayer. If bankers haven’t covered themselves with glory recently, government direction of financial investment certainly wouldn’t be any improvement.