-Novelist John Lanchester tells Peter Watts the way to examine the credit crunch and why he doesn’t talk about fish.

There are many quotable lines in Whoops!, John Lanchester’s witty, forensic and accessible analysis of the recession, but the key one could be when he explains the traditional role of banking and concludes: “This isn’t glamorous or interesting, but then banking is not supposed to resemble base-jumping or hip hop.”

Basically he’s saying, bankers forgot how to bank. Novelists would rarely make such bold statements about the unfamiliar world of finance, but Lanchester is different. “Nobody is born with an understanding of credit default swaps, but I didn’t feel it should be completely alien to me,” he says. “Part of the reason I can write about this is that my dad was a banker. If he’d been a fishmonger, I’d have opinions about fish.”

Lanchester was already researching finance as background for a novel when the credit crunch happened. “In fiction you research things to leave them out. You have to know about things to not write about them. I’d written about companies – Google, Microsoft and Murdoch – for the London Review of Books and my editor suggested I do something on banks.”

That piece, Cityphilia, came out after Northern Rock collapsed. It hit a nerve. “I was lucky with the timing,” says Lanchester, which is only half the story. There was already some good if hindsight-soaked writing about the impending recession in circulation, but Lanchester brought a rare combination of élan and exactitude to the project. In Whoops!, he deals well with the off-putting enormity of the numbers (“a million seconds is less than 12 days; a billion is almost 32 years”) and although there is abhorrence at the waste and stupidity, there’s also an impish humour that means Lanchester is never in danger of resorting to homily.

Cityphilia led to the article Cityphobia, which took in the Lehman Brothers crash, and then Lanchester realised he had the makings of a book, a project he could work on while the novel sat in his drawer awaiting a final polish.

At the centre of Whoops! is a tale of risk and greed and how they can combine to make staggering, terrifying numbers. The problem was that unregulated bankers developed new formulas to manage risk, and then found they were experiencing losses that, according to their calculations, should have had the equivalent probability “of winning the UK National Lottery 21 times in a row”. We now realise that their calculations were wrong, but nobody understood this at the time: for a long while they just thought they were unlucky.

Lanchester says he is trying to break down the barrier between two cultures: the financial services industry and the rest of us. “I’d come to feel very strongly about the subject, and felt it was important to communicate across the culture gap,” he says. “The fact that people didn’t try to communicate is the reason we got where we did, because it allowed the banks to make up their own rules. I thought I should do anything I could to change that.”

Lanchester is fascinated by the property market, the British-American instinct to own land despite the fact that it’s often a terrible investment, something that he traces to a fear of unsettlement dating back to the Industrial Revolution. He visited Baltimore to see some of the sub-prime houses owned by the poor whose mortgages were magically repackaged as AAA-rated debt, a risk-free standard achieved by only nine American companies and which led directly to the recession. “It could have been anywhere, but I chose Baltimore because I liked the idea that season six of The Wire would have been about this,” he says.

A year after the recession and “it’s like nothing has changed,” he says. Bankers are paying themselves vast bonuses, massive debt-financed corporate takeovers are back in vogue and the housing market in London is experiencing another unsustainable bubble. Can the culture change?

Lanchester isn’t sure. “Around half of bankers are ideologically committed to this,” he says. “They believe in dog-eat-dog, they think it is better to have winners and losers, it’s better to have the extreme rich and obscene bonuses, because that is what motivates people; the other half don’t care at all.”

Lanchester anticipates “brutally divided politics” as the American and British governments struggle to pay back the debt, and worsening relations between public and private sector workers. And even as this happens, the underlying problems aren’t going away.

“Bankers feel reviled. They also feel misunderstood. What happens when this happens again? All the structural problems are still unfixed and these catastrophes are happening at regular intervals. What politician will be able to say, ‘Sorry we need another £100 billion bailout’? This cultural gap is going to be expensive. But at the moment everyone is behaving as though the idol has fallen off the pedestal but then they’ve polished it, stuck on some Sellotape and put it back up.”

Whoops! is published by Penguin.