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"Congratulations, hippie scum", Bigfoot greeted Doc in his all-too-familiar 30-weight voice. "And welcome to a world of inconvenience. Yes, this time it appears you have finally managed to stumble into something too real and too deep to hallucinate your worthless hippie ass out of."

This is the sound of Thomas Pynchon doing detective fiction, noir as a packet of Rizla Black cigarrette papers. Pynchon has done pastiche and parody before - swathes of it in Against the Day, a novel of anarchism and ballooning. But this time it is for real: the old genre buster, master of digression and unfilmable plotlines, has produced a genuine piece of crossover commercial fiction.

Inherent Vice is the story of Doc Sportello, private detective and acid casualty, based in Pynchon's fictional homeland - LA's Gordita Beach - during the early Nixon era. Doc, like most Pynchon protagonists, still yearns for a woman he should probably forget; lusts after others he would in no space other than fiction have a chance with; and shoulders the sorrows of the world aided by large quantities of mind-expanding drugs, some so niche and so Seventies that their names have been forgotten, above all by those who took them.

Sportello's opening attempts to sort out a problem for his ex, Shasta, leads in short order to the disappearance of her boyfriend, property developer Mickey Wolfmann. Then to a whole bunch of murders, arrests and encounters during which Doc discovers the essential duplicity of the free-spirited surfer/doper community he's a part of, and the indispensibility of their treachery to the success of the counter-revolution.

Like Vineland this book is about the failure of late sixties radicalism, its collective self destruction in pursuit of individual happiness, its easy infiltration by and ultimate compromise with the law enforcement agencies of Nixonian America. Indeed there are even several characters re-used from Vineland: saxophonist Scott Oof reappears in a cameo role; Kahuna Airlines - the only Hawaiian based carrier with in in-flight head shop - is explored further. Other characters from Vineland are mirrored: we get two more crazy muthas just out of Vietnam, only with different names; we get a badass narco cop; a messed up organised crime king and of course an unattainable ex-girlfriend.

What's gone though are the large swathes of digression, reflection and description that make reading any other Pynchon novel an exercise in hermeneutics. Here the story is boiled down to chunks of movie-style dialogue and chunks of Pynchonesque description. I say Pynchonesque because there is, at times, and not for the first time recently, a slight suspicion that he is actually parodying his own style. The story elements are - like in no other Pynchon novel - highly filmic. He has accepted, for the purposes of the genre, Kerouac's doctrine that "the movie in words [is] the visual American form". It turns out that - again in contrast to every other Pynchon book - his agent is right now trying to sell the screen rights.

To people with hardcore Pynchon habits, for whom no year can pass without a sneaky dip into his world Jungian craziness and multilayered subtext, this book will come as a disappointment. It reads, at times, like Pynchon after a long week at the Betty Ford Clinic, with all the dirt, most of the digression and all of the movie-deal-breaking sexual perversions detoxed out of his system.

Indeed there were points reading this (you always experience some kind of paranoia reading Pynchon) where I began to wonder whether the author was not playing a giant joke on the literary world, and whether he would pop up on The Simpsons with a paper bag over his head (again) to decry the critics: "Jeez, you guys it was just a joke".

However, once your consider the recent trajectory of Pynchon's work you can see where he might be going here, and why. Gravity's Rainbow was at the same time a genre-destroying and genre-creating book. Vineland was a return to tightness and closure: set in two periods - the treacherous eighties and the betrayed sixties - and in the gorgeous landscape stretching from the fictional Gordita (LA's Manhattan Beach) to the fictional Vineland (North California's Mendocino County), it achived an emotional truth some would argue he lost in the two subsequent chorizo-thick books (Mason & Dixon, Against The Day).

Since he does not give interviews, apart from to Matt Groening, we are left to speculate: here is one speculative version of the thought process. Ever-more convoluted riffs on the same themes of paranoia, the death of leftism, bizarre sex, yearning and mind-expanding drugs are proving harder and harder to hold together with any kind of narrative. As with some of Charlie Parker's later solos, there is the suspicion that you can hear, as Pynchon once put it "ol' mister death drumming his fingers" in some of this later work. So adopt a narrative genre. In fact kill three birds with one stoner: detective fiction gives you tautness; the hippy-era California setting puts you back in the world of your most truthfully drawn characters; and hey, its also a prequel so that's another genre bent. (Surely once he is dead some member of Pynchon's literary stalking fraternity will, Tolkien style, begin the labourious task of back-plot filling the characters: "Zoyd Wheeler, the Surfer Years").

The result is a book that will probably remembered as the work that introduced Pynchon to the masses.But it is not the same journey; the excruciating trip into the nightmare of the soul is is cut short; the lyricism comes in movie-length chunks instead of those pages of forever.

As Edward Said noted in his reflections "On Late Style", artists often confront their later years with a defiant return to something: Richard Strauss to unashamed conservatism in Metamorphosen, Mozart to the simplicity of bedroom farce in Cosi Fan Tutte. Plus they exhibit a distinctive refusal to resolve, an abrasiveness, a determination to dig once more through the themes discovered in a period of youthful rebellion, to see if they can find what they were looking for.

If this turns out to be Pynchon's late style (he is 72 years old) then, how weird for the vast tribe of followers who've constructed all those Wiki sites devoted to line-by-line deconstructions of the texts: this hardly needs deconstruction. It is translucent; at times obvious. It is, in fact, a small masterpiece but because it adopts a genre it also has to be compared to other works in the genre, not just - as normally with Pynchon - itself.

Said observed that the late style artist typically "abandons communication with the established social order of which he is a part and achieves a contradictory, alienated relationship with it". But Pynchon doesn't need to: he achieved that long ago. This late turn in his literary style achieves something opposite but equally surprising. It is a move towards form, and closed form at that, towards genre, and towards communication. And it is a move away from subtext.

I think, as far as you can presume to know anybody who has not given an interview or been photographed for forty years, it is a move towards himself.

* I am on holiday. Back on Newsnight in the second week of August

I will take a two week break but on 31 July. My review of Thomas Pynchon's Inherent Vice will be published here (there's an embargo). If I can get on the internet I will probably blog about Jez Butterworth's extraordinary play Jerusalem, which I have just seen. Otherwise, normal dismal-scientific service will be resumed here in the second week of August. Newsnight will of course be keeping you up to date with the public finances, economic crisis, green shoots, quantitative easing etc, at 2230 weekdays, ³ÉÈË¿ìÊÖ TWO.

If you are feeling underwhelmed by the Banking White Paper, produced today, you are not alone. Her Majesty's opposition has described it as a "white flag not a white paper"; the Libdem Treasury Spokesman Vince Cable called it "a living will" for the government.

What I take away from it, at first reading, is the limited scope the UK government sees for itself in the prevention of future crises and re-design of the global financial system.

The underlying philosophy of this White Paper can be paraphrased thus: the banking crisis was created by banks, there is only so much governments can do through regulation; here is our best shot - and a lot of it will rely on having an effective and enthusiastic regulator instead of the one we had before - but much of the detail is so international, and so long-term, we can't really decide much now.

Concretely the government is trying to resolve/bury the row over who should police the systemic risks by creating a new Financial Stability Council, with Alistair Darling in the chair, and "minutes" to ensure transparency. If you have ever read the minutes of the Monetary Policy Committee you will understand why financial journalists are unenthused by the prospect of more minutes.

There are two proposed economic measures the government intends to use to prevent banks driving themselves to the brink of collapse.

It will in future let the FSA force individual banks to hold larger amounts of capital, above the 4% minimum set by the FSA. This will be done bank by bank, as a kind of tax on overwieldy size, or risk taking or bonuses deemed to high. But there is no system or public criteria or sliding scale of capital quotas laid out.

It is a very British arrangement. One member of the great and good will meet another, in the shape of a bank CEO, and say "your risks are too high"; what then will the bank do in response? They will lobby. Not a single episode of lobbying or the numerous private meetings and social engagements will be publicized. What we will know, at the end of it, is the amount of capital bank X is required to hold.

It is more concrete when it comes to "leverage".

The White Paper recognises that, despite there being a capital adequacy regime, banks were able to fund themselves by overborrowing. So the Treasury has opted to support a "leverage ratio" - so banks can only borrow a certain amount compared to their capital. This will be set in Europe later on, so there is no way of knowing what it will be.

How would the typical British taxpayer, currently exposed to 680bn worth of toxic debts from banks that were over-leveraged and had to be nationalized, influence what that ratio should be. Answers on a postcard please to the unelected president of the European Commission.

Three concrete ways of preventing a future crisis have been rejected. Breaking up complex banks so that their "casino" part and their "piggy bank" part are separate, as in America in the 1930s, is ruled out.

Doesn't work, says Alistair Darling. Breaking up banks that are too big to fail, as implicitly called for by Mervyn King, also ruled out.

Finally, the idea of using interest rates to lean against the wind in an asset bubble is ruled out on the basis of the "Bank of England's successful record of interest rate setting over 12 years".

This, remember, is the Bank that raised interest rates during what we now know were the first two quarters of recession.

Of all the measures ruled out today, I think this is the most significant, because it basically says monetary policy should not be used for "macro-prudential" - ie crisis busting - ends, only to target inflation.

The problem is we already know that any recovery is going to be highly inflationary; no regulations are in place to stop speculators piling into oil and commodities once again and therefore, long before the Basel Committee and the European Commission get around to telling us about new capital ratios and leverage requirements, the Central Banks will be facing another "scissors crisis" where the inflation graph is rising and the growth graph not, or falling.

Leaving aside the party political differences I could not help noticing how sparsely attended the White Paper announcement was in the Commons. Even senior Labour ministers outside the tight circle of finance and business policymaking are said to be nonplussed by the economic crisis.

Clearly the majority of MPs could not be bothered to come and hear the government announce its first comprehensive answer to the financial meltdown - or take part in the debate. The 23 backbenchers who tried to question Alistair Darling were from that school of professional finance watchers that has struggled to inject heterodoxy into the political debate. They struggled again today.

I feel a horrible gloom descending on the process of decision-making in the face of this crisis. The Conservatives signaled they will rip up more or less every measure proposed today, should it make it to the statute books before the election (and there is not much of that).

A lot of work and discussion went into the White Paper, and you can feel the hand of civil servants and economy wonks in large parts of it. But so many of the key decisions will be taken in Brussels or Washington, or in the bank boardrooms, there was a sense of politics being overwhelmed by economics today. It had the sense of being the start of a "long goodbye" from the government.

I've learned that key parts of next week's Banking White Paper will actually turn out to be "green" - that is, it'll be more of a discussion document. Now then...

Between August 2007 and October 2008, one after the other, the British banks had to be rescued. First Northern Rock, then HBOS, Bradford and Bingley, RBS and Lloyds. Bank bosses got their marching orders. And one of the the regulators did a vanishing act as well. Sackcloth was worn. A whole new era of banking regulation was promised.

Before we had the FSA we had what bankers used to call, regulation by eyebrows. One of the great and good would wander up to a City banker, possibly at the cricket, and say - "You know that thing you're doing at the bank, well ...." and raise his eyebrows.

Today there's no chance of going back to regulation by eyebrows. But there is a bit of a spat over whose eyebrows will be the most powerful in the future.

The new boss at the FSA, Adair Turner, has called for a "radical change" in regulation.
Central to that is the power to force banks to hold more capital. Banks that hold more capital make less money. Turner wants to use this power

• to raise the amount of capital banks have to hold the boom phase of an economic cycle


• penalise banks seen as taking unneccesary risks


• and to rein in banks pose a threat to the entire system

Newsnight understands measures along these lines will be in the White Paper due to be published in the next week. But they'll work bank by bank. There will be no general quota for the capital banks must hold; nor will there be a general limit set of the leverage (i.e borrowing) banks can work with.

There is general agreement now to move to something called "macroprudential regulation".

This means regulating to prevent booms turning into bubbles, and considering risks to the whole system not just individual banks. But behind the scenes it has been eyebrows at dawn over who will actually wield this power.

The governor of the Bank of England thinks he should do it. So do the Conservatives. The government wants the FSA to do it. And the banks above all want certainty.

There is another problem: Britain is home to some of the world's biggest banks. Some, like RBS, were clearly too big to fail. Others, like HSBC, are so international that it's never really clear who would, or could, pick up the pieces if it failed. That has led the Bank of England to cause a few eyebrows to be raised, by saying this:

"If some banks are thought to be too big to fail, then, in the words of a distinguished American economist, they are too big. It is not sensible to allow large banks to combine high street retail banking with risky investment banking or funding strategies, and then provide an implicit state guarantee against failure." (Mansion House speech)

Newsnight understands the government will demand the banks that do a mixture of low risk and high risk business break themselves up into legally separate entities, so that the deposit taking part could be rescued over a weekend and the high-risk part allowed to fail. There will be new rules drawn up under existing law.

Many in banking fear that the behind the scenes battle will mean next week's White Paper is inconclusive.

I understand that - on rules to protect the whole system, and on the issue of breaking up banks that are too big to fail, the government is set to issue, effectively, a Green Paper - that is a discussion document. The government is, effectively waiting to see what the USA and EU do on this. Some in the world of banking see this as a sign of weakness.

In the new system there will be no general quotas for holding capital, no maximum ratio for the amount of borrowing a bank is allowed to do. It will all be regulated, bank by bank, by Adair Turner at the FSA. it's a very British solution.

Nearly a year on from the financial meltdown, amid a political stasis on the strategic issue of regulating systemic risk... we'll get a discussion document. As one banking insider put it to me rather cynically tonight: it will be "Winning the Fight for Britain's Banking Future".

But the way, forget Matt Lucas and Stephen Fry - follow me on Twitter, .