More on those damned banks

I am more or less with Ezra on this one. Perhaps Geithner's cunning plan is that when private investors pronounce Citi and BofA insolvent, then Treasury will have the credibility to nationalize, but they certainly don't have that now, even if wise men such as The Maestro are all for it. If the Obama administration had made nationalization priority number-one on Jan. 20, they may have rolled over the political speed bumps, but that day has come and gone.

And while it is certainly true that what is good for Wall Street is not necessarily what's good for the economy as a whole, I don't think we can simply discount the daily gyrations in lower Manhattan. It's one thing to be angry about bonuses and fat cats, it's quite another to be angry about that and watch the S&P 500 dive another 12 percent, taking your 401k along for the sickening ride.

Fifth, they could simply be afraid of the market. More so even than they fear pundits. Though plenty of folks talk about the need to ignore the daily whips of the Dow, Geithner certainly took a lot of damage from the market's reaction to his initial announcement, and you could argue that the administration economic hand remains weakened as a consequence of that damage. Maybe they feared a repeat and so built a bill they knew the market would like.

The administration needs to balance systemic crapulence in the banking financial industry, all sorts of Capitol Hill agendas, the stock market, and a public that is by turns angry and frightened.

UPDATE: The plan seems to be coming together, after all.

When he goes before a Congressional panel Tuesday morning, Timothy F. Geithner, the Treasury secretary, is expected to call for the Treasury Department to be granted greater powers to seize troubled financial institutions that aren’t banks.

“The United States government does not have the legal means today to manage the orderly restructuring of a large, complex nonbank financial institution that poses a threat to the stability of our financial system,” Mr. Geithner said in text of his opening statement, which was made available Tuesday morning on the Web site of the House Financial Services Committee.

This expanded authority would have given the government more options, and potentially more control, when it stepped in to save American International Group from collapse last fall, Robert Gibbs, a spokesman for the White House, said Tuesday morning before the hearing.

UPDATE II: Ambinder seems to have reached a similar conclusion to mine.