Grider: "Euthanize Banks"?

Grider's solution to the banking crisis is:

1. Government must take control of the system to supervise a just unwinding of the mess--whether we call it nationalization or something else. Handing out money and leaving bankers in control of how it's spent is nutty and morally wrong. People everywhere understand this. Only Washington seems oblivious to the irrationality of what it is attempting.

So the government should "supervise a just unwinding of the mess." What does that mean exactly? I hear everyone who is opposed to Geithner's plan saying something like this. It sounds nice, but I never hear any details of how exactly we go about "justly unwinding this mess" without spending the public's money to do so.

This is whats up: there is a huge hole in the balance sheets of banks. A ginormous hole. The things that were once valued very highly valued are now very lowly valued. Grider acts like if we just "nationalize" or "euthanize" the banks, this hole will go away. But it won't. Someone must fill this hole, or else the banks and the entire global economy goes back to the 1930s. So the question is, who is going to take the hit so that we can fill the banks' hole? Our options are:

1. The banks' creditors. The usual bankruptcy procedure, which is what nationalization would be, is to tell the creditors of the bankrupt company "sorry, you are not getting your money back." Presumably this is how proponents of nationalization want to fill those bank holes. The problem is that the creditors range from everyone to pension funds, to Saudi Arabia, to China, to other banks who are also bankrupt. So telling all of these groups that they are not getting their money back is financial suicide. It would very possibly make everything worse, for all of us. Nobody knows what would happen. The government may be able to pick some of the creditors, but how do you choose which ones are safe, and which ones will cause a global panic? What if you pick the wrong one? If you were treasury secretary would you take that chance? I guess its a lot easier if you are just a writer for the Nation.

2. The second option to fill the hole is to just not fill it, and let the banks die. That's the GOP's favorite option. The government just sits back and lets the "free market" take care of the problem. Uh, yeah, that'll work.

3. The third option is to fill the hole with the public's money. Its simple, its predictable, it will prevent the global financial crisis from getting worse, and it pisses everybody off. And I don't really blame the Grider's of the world for being pissed off. We should be. But lets put the anger where it belongs and never let this happen again, rather than tying the hands of an Administration that is doing the best it can, and really doing the only thing that makes sense.