The N word...

It's pretty bad when things are changing so fast you have to print your own bumper stickers -- or, perhaps, when liberals are so confused they can't figure out what they, collectively, want.

Okay -- not every liberal wants collectivization, but hell, sometimes it's just time.

There are two ways to break up companies said to be "too big to fail." One is to withhold bailout funds so as to force them into bankruptcy, the "let the free market sort things out" method. The other way is for government to wade in and do it. How?

Let's look at the government's options. One possibility, I suppose, is to bring anti-trust suits against the largest of the financial companies. Anti-trust suits, though, take years. We don't have years. Another possibility is for Congress to repeal the loathesome Gramm-Leach-Bliley Act and bring back something resembling Glass-Steagall. Then, presumably, megabanks like Citigroup would be obliged to break themselves up. Given the powerful obligations of members of Congress in both parties to the finance sector, that's not about to happen any time soon.

All that remains, as far as I can see, is nationalization -- government takes over the overbloated banks, wipes out the shareholders, slices, dices, and sells off the healthy assets for a fair price. The taxpayers still are stuck with the toxic assets, but at least it's not a total loss. Writing in the Times, though, former Fed governor Alan Blinder offers what he says is an alternative -- the "good bank, bad bank" solution, in which "the basic idea is to break each sick institution into two. The 'good bank' gets the good assets..." and "the 'bad bank' inherits the bad assets."

Huh? How does government break up the bank without first nationalizing it? And while it's clear that the taxpayers are stuck with the "bad bank," who gets the assets of the "good bank?" Surely not the shareholders -- that would be moral hazard of the worst kind.

"Bad" bank? Why not a "GOOD" bank?

The more I read about the "bad bank" idea, the less I like it.

Obama, by any rational measurement, is a major improvement over W -- but the same might have been said of any of the Democratic primary candidates, or of Wile E. Coyote, or Richard M. Nixon, or even Oprah. Where Obama falls down, though, is in surrounding himself with Clintonistas who instinctively herd towards what they perceive as the "center." They don't seem to have noticed that "liberal" isn't a dirty word anymore, nor that while the right is as bombastic as ever, fewer are listening. And so, Geithner and Summers and the rest of the Robert Rubin protegés are having their way: nationalization remains verboten, and it looks like the American people as a whole will have to eat the losses racked up by the banking industry -- not just the industry's stockholders and bondholders.

It's true that Obama owes a debt to Wall Street, which provided the funds that let him take the lead in the "money race" early in the primary season. It was that lead which got him serious attention from the media, which in turn enabled him to mount a successful campaign for the small contributions that won him the presidency. Honestly, though, I don't think he owes the bankers over a trillion dollars -- at least not our trillion dollars.

So, instead of wasting taxpayer money on a bad bank -- a kind of financial sin eater that would absorb the toxic assets of possibly zombie banks and transfer them to current and future taxpayers -- why not use the remainder of the TARP funds to create a good bank, government owned and operated, which would provide loans directly to businesses that will create jobs and creditworthy individuals who want to make major purchases? There are plenty of out-of-work bankers available to organize and staff the new bank, and the vast majority of those had nothing at all to do with the derivitives failures that caused the current mess.

Yes, I know. That would be socialism. Shame on me for being both unregenerate and unrepentent. It wouldn't have to be permanent, though -- the good bank would exist just long enough for zombie banks finally to stumble into their graves. After that, the good bank's assets could be sold -- at a profit -- and we all could go back to private banking again.