Ben? It’s Hank. I Have an Idea. Let’s Recapitalize Banks!

After all this time Treasury is now getting around to saying it might start actively taking equity stakes in banks as part of a recapitalization program. Gosh. Now where have I heard that idea before? I can’t quite recall. Oh yes, pretty much everywhere but Treasury.

Anyway, as Treasury and the Fed have discovered, nervous banks with access to the Fed spigot are like worried consumers who get stimulus checks: They don’t spend, they hoard. And given that the fundamental issue isn’t liquidity — there is absurd amounts of cash out there — but insolvency, and given the experience of other countries during similar credit crises, and given how slow and expensive TARP is likely to be, I’m glad Paulson, Bernanke, et al. are seeing some sense.

Now, if it’s not too much to ask, it would be nice if Ben and Hank — with some assistance — picked favorites didn’t try and prop up every bank. Please?

More here.

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