After months of intense negotiations, Project Merlin was finally unveiled last week, with George Osborne arguing that we should stop bullying the bankers and move “from retribution to recovery”.

Apparently John Varley, Barclays’ ex-Chair and a key player for the banks, named the deal after a falcon. The media thought it was named after the famous wizard, and had much fun dressing up George Osborne like Harry Potter (which perhaps was what Mr Varley had hoped for all along).

And the Harry Potter link turned out to be most appropriate as the idea that the deal was ever going to amount to much was anyway a complete fantasy, as many have pointed out.

Behind the deal, of course, is the key point that we all (yes all of us) bailed out the banks massively after their reckless lending and financial wizardry got them into a huge mess and caused much havoc for everyone else.

Project Merlin (or Project Gremlin as my colleague has nicknamed it) is supposed to symbolise the macho government grabbing the banks by their assets and squeezing some key concessions out of them, with the banks meanwhile showing contrition and saying that they “understand the public mood and have responded”.

So much for the idea. Sadly the concessions are so pathetic they simply don’t stack up. Or put another way, Varley and Co completely outwitted the Treasury and the government has just missed its one big chance to force the banks to lend to viable businesses and to get investment flowing.

Hang on, you say, haven’t the Mega-banks (that’s HSBC, Barclays, RBS-NatWest and Lloyds-HBOS, with Santander agreeing to the bits of the deal) ‘pledged’ to lend some £190 billion to UK companies, of which a substantial chunk will go to small firms? And isn’t this supposedly £10 billion more than in 2010?

Well, yes but as ever, terms and conditions apply, and we all need to read that pesky small print.

For starters, that £190 billion target is a gross target not a net target. Or put another way, suppose that businesses repay £190 billion of debt to the banks in 2011 while the banks lend out £190 billion. Gross lending is a whopping £190 billion and the banks can point to their socially responsible adherence to Project Merlin, while net lending is... a big fat zero.

So if the aim of the government as really to force more lending, investment and business growth then a gross lending target is useless. Or as the Lib Dem’s own Lord Oakeshott put it, the target is a “weak, waffly aspiration with vast wiggle-room”.

By the way, this gross target isn’t actually binding anyway on the mega banks.