bank nationalization

The time for good options to deal with the banks was in, oh, 1999. That was when the Gramm-Leach-Bliley Act passed, repealing the last of the Depression-era regulations that had kept the American banking system sound for more than six decades. (Yes, the same Gramm who got rich once he left the Senate and joined a big bank, and called us a "nation of whiners.") Now some of our largest financial institutions are Zombie Banks — but we have no Mila Jovovich armed with miniskirt and full arsenal to take them down. They are left with only the most primal instinct: To feed on the Treasury. Resident Evil, indeed.

Paul Krugman makes the case for nationalization today. Socialists Lindsey Graham and Alan Greenspan have also signed on. Economist Nouriel Roubini, who called the crash, says a takeover would avoid throwing good money after bad. Indeed, some of this is not too complicated: Think back to the wreck of the Penn Central railroad, when the government stepped in and created Conrail. Later it was relaunched as a successful public company. Receivership is a better way to think of this than the charged word "nationalize."

Who loses? The shareholders. And as much as one might get a populist shiver up the leg from the idea of some big hedge funds getting sucker punched, remember that average Americans were lured into the market, too. They've lost about half their nest eggs already. Those in bank stocks — and Bank of America and Citi are widely held — will lose more. But, as Jovovich's Alice teaches us, you can't mow down a bunch of zombies without collateral damage.