So what's wrong with creating a "good bank" owned by the American people?

The current wishful thinking in the debate over what to do with the failed U.S. banking system is that once the troubled banks are righted, they will not only float, but lift the sinking economy with a surge of loans and investment money.

The latest salvage strategy making the rounds is to create a "bad bank" (as if we didn't have enough of them already). But this one would be different; think of it as mortgage-backed Viagra, unburdening the men of Wall Street of their nonperforming loans, freeing them to again arise to a climactic quarterly finish.

At its most basic level, the plan would buy up bad loans made by bad bankers, rewarding the most inept, incompetent and corrupt Wall Street peddlers with government largesse – leaving them with their refreshed "good banks" packed with profitable loans, while sticking taxpayers with a foul bag of bad loans and other "toxic assets" in what's deemed a "bad bank," government-owned.

Once again, a U.S. government "rescue" plan would not only protect the executives most responsible for creating the whole mess, it would free them from liability for their misfeasance. It's not yet clear how much weight the Obama administration is giving to the plan.

What does NOT appear to be on the table is the creation of a different kind of "good bank," a Central Bank wholly owned and operated by the U.S. government, a bank that Americans could trust not to steal what remains of their savings.

With confidence in the financial system at an all-time low, why not a government-run "good bank"? A Central Bank, unlike today's Federal Reserve which does little more than set interest rates, could offer full-service retail and commercial banking while enjoying the public's trust.

Then, if and when Wall Street banks and other big banks fail, the Central Bank could swoop in and scoop up their FDIC-insured and other accounts, along with their good and bad loans. The bad loans could then be renegotiated, held onto, or – as a last resort – sold at a discounted market rate.

The Central Bank would operate alongside surviving private banks, which could offer competitive interest rates to lure customers, while other account-holders might prefer the greater security of a bank that doesn't get mixed up with as much risk-taking.

Creating the U.S. Central Bank would also give lawmakers and regulators sufficient time to put into place an entirely new set of rules to govern how banks would be allowed to operate in the future. American workers, already buffeted by the double loss of their life savings and often their jobs, would know there is an alternative to their mattress for protecting what remains.

Yet Obama's newly minted Treasury Secretary Timothy Geithner is seeking to discourage talk of nationalizing troubled banks. Geithner, who became president of the New York Federal Reserve Bank in 2003 and thus was implicated in today's financial crisis, has argued that government officials would make lousy bank managers.

Confidence Game

But public trust in the current financial system is fast collapsing, as the Wall Street corruption and government collusion come into sharper focus. American workers, who believed in the capitalist system and bought into the notion that the government was keeping an eye out for excesses, feel betrayed. Most will never see their lost savings recouped.

Capitalism is predicated on the idea that greed drives growth and innovation, and that the government's role is to impose sufficient restraints on that self-interest to protect the public good. But it hasn't worked out that way.

Presidents Bill Clinton and George W. Bush forged international trade pacts that supposedly promoted economic growth even as they stripped bare the U.S. industrial base and cost millions of American their jobs.

Congressional Democrats also joined Republicans in instituting landmark banking "reforms." Profits surged as brokerage houses and banks morphed into floating casinos. Then, as the bloated system began to implode, President Bush turned to Henry Paulson, the Goldman Sachs chairman he picked as Treasury secretary, to be his cleaner.

By the time the Bush administration left office, the U.S. Treasury was sacked of trillions of dollars in bailout money and guarantees to keep the largest banks afloat. Yet still, millions of workers lost their jobs, their health insurance, their retirement savings, their homes.

And class-action lawsuits rarely recover much for wiped-out common investors. Plus, there are no tough-minded prosecutors minding the shop. A U.S. judge even refused to lock up Bernard Madoff, the former chairman of the NASDAQ stock exchange who allegedly bilked $50 billion from investors.

(The last tough Wall Street "sheriff," Elliot Spitzer, was laughed out of politics in 2008 when it was disclosed that he had frequented prostitutes. The U.S. news media found it funny – and disqualifying – that someone who fought financial corruption by Wall Street's "masters of the universe" could have a personal weakness of his own.)

Now, just days into the Obama administration, Americans across the country are doing what the new President suggested – getting up and dusting themselves off. But they also are checking their wallets and realizing that the Great American Bank Robbery may still be in full-swing.

As the big bankers await their next feeding at the bailout trough, the New York Times reported that Wall Street titans reacted to their unprecedented losses in 2008 by paying out at least $18.4 billion in executive bonuses.

Like much else about the initial Bush bailouts, it's not clear how much of that bonus money came from taxpayers. We don't know because Paulson insisted there be no need for bailout recipients, among them his former firm, to account for what they do with the funds.

As if that weren't enough, a poll of 900 financial industry employees polled by eFinancialCereers.com found that while nearly eight out of ten got bonuses, 46 percent thought they deserved more, the New York Times reported.

Taboos

Granted, it's only been a week, but President Obama's economic team is largely in place and a major stimulus package has already passed the House. Still, there's barely a whisper about fundamental overhaul of the financial system.

Regulators have yet to broach a ban, or even a curb, on the destabilizing markets in derivatives and other fanciful "financial instruments," although a bill was introduced this week that for the first time would regulate hedge funds, a key factor in Wall Street's high-stakes gambling.

The Obama administration is said to be working on a more comprehensive set of regulations that would impose rules for credit default swaps and other hokum-backed securities.

Despite all the talk in Washington, "nationalization" is kept on the dirty-word list. Republicans ask, if America nationalized its banking system, what would differentiate it from the likes of Vladimir Lenin and Fidel Castro?

And while it's true that the Republican Party's leader until last week, George W. Bush, did engage in a form of socialism by effectively nationalizing the insurance insider AIG, along with mortgage giants Fannie Mae and Freddie Mac, he didn't use the dreaded n-word.

Obama now faces many tough choices in dealing with the economic mess. He can choose to rely on the very people who created the crisis, a strategy similar to the one he's following regarding the wars in Iraq and Afghanistan.

Or he could go in a very different direction by creating a "good bank," a trustworthy government-run structure to absorb failed banks, protect the savings of American workers and help the nation achieve a soft landing.

Brian Barger is a veteran investigative reporter based in Washington.

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