And now the banks...

...again. Or, more to the point, still.

Yes, it's nice to see the ass end of Henry Paulson exiting the Department of the Treasury, but it's also a little disconcerting to see Tim Geithner on his way in. As President of the New York Fed, he was pretty much Alan Greenspan's right-hand man -- anyway, I can't remember him voting against any significant Greenspaniana. Should we assume that Greenspan's mea culpa applies to Geithner as well? I'd be a lot happier if I were sure Obama didn't select Geithner based solely on a recommendation by Robert Rubin.

(Hmmm... What have we heard about Rubin lately?)

So according to all the usual sources, Obama's choices for dealing with the banking crisis come down to these:

• Infuse even more taxpayer money into the major banks, perhaps with requirement that they actually lend it out this time.
  
• Have the Treasury create one glorious, taxpayer financed "bad bank," which would buy all those "toxic assets" from the private banks. This is, essentially, Paulson's original plan.
• "Fence off" the toxic assets by guaranteeing their value, so that banks can go back to doing business as usual without worrying about further write-downs.
• Figure out which banks are "zombies" -- failed banks that will struggle on only with continued large infusions of taxpayer money -- and nationalize them.
  

The "bad bank" idea has been gaining in popularity because it embodies the traditional American approach of socializing all losses while privatizing profits. It rewards the greed and stupidity of those who created the mess, at taxpayer expense, since the only way it could truly save zombie banks is by paying them substantially more than their toxic assets are worth.

Also a contender is "fencing off" toxic assets by guaranteeing their value -- in essence, writing insurance policies on sinking ships. Proponents of this approach don't like to mention it, but there is a less folksy name for that kind of insurance -- credit default swaps, the same kinds of financial instruments that helped get us into this mess. Haven't the taxpayers already eaten enough of those when we bailed out AIG?

Nationalization, of course, is a dirty word. It's the kind of thing those, those Europeans do, after all, and hence completely unAmerican. The fact that it worked very nicely back in the 1990s, when the Resolution Trust Corporation was formed to resolve the Savings and Loan crisis, is being studiously ignored.

Geithner, at least, says that this time we won't be leaping in head first without taking the trouble to see whether or not there's water in the pool. Free market über alles ideology has taken a beating recently, and Barney Frank's leadership of the Financial Services Committee is some cause for comfort. We'll see what happens.