Ghost Story: Put Banks Out of Their Misery

Decision-makers should bite the bullet and put the banks into receivership or some other form of bankruptcy.

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Doubtless they are scared out of their wits at what that might do to the stock market. The market will take a big hit, but in due course it will bobble up again. That's what markets do.

They are scared of a financial landscape in which institutions such as Citigroup and Bank of America have been temporarily nationalized. Besides their own friends, the stockholders in these institutions include pension, hedge and mutual funds. These, as well as thousands of individual investors will be wiped out, erased, liquidated. The same may hold true for the bondholders. A lot of people, most of whom are undeserving of such treatment, are going to be badly hurt.

They will be less badly hurt if the deed is done now than they will after 10 painful, profitless and demoralizing years have passed, and so will the country as a whole. The damage done by stalling until 2020 will be as great to this society as it was to daily life in Japan.

Mercy-killing the insolvent financial institutions is scary. The lives and happiness of millions are at stake. All the more reason to listen to the bakemonos, because this ghost story is true.

Nicholas Von Hoffman is a columnist for the New York Observer and is an author, most recently, of Hoax (Nation Books, 2004).