Go after banks, establish all "hard to value" assets, put a market value on all such (there is a functioning market for this stuff, just the bid prices are too low for the holders' tastes), establish a "worst case" net worth for each bank, and have the FDIC close down any bank technically insolvent. Start with the biggest banks first. Act as rapidly as possible. Liquidate the assets including, especially, credit default swaps. If an asset has zero value, it has zero value.
Subtract any assets from the balance sheets due to TARP or other programs, go with the actual assets, not the federal loans, repos, asset value guarantees, all that stuff. Very important not to count federal dollars as bank assets.
This would close Citicorp, Bank of America, Goldman (now a savings bank, remember), JPMorgan, and probably the rest of the big names and their stockholders and bond holders. Interest rates will go up. Tough.
I honestly think that getting the walking dead banks off of life support would fix things very quickly, like this year. Worry about pension funds, insurance companies, and all that later. This will cost a trillion dollars or so but there is plenty of time, months and months.
Replace Geithner and Summers. They are Rubin's disciples and coat tail riders. Put in somebody with some seriousness.
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