I do not know whether it would be good policy, but, oh! man! it would be fun to watch Wall Street bankers try to pay for their golden privies on GS-17 salaries and have to face annual performance evaluations from persons who really don’t like doing evaluations and do them with one eye on the budget and no eyes on performance:
There is a simple alternative, which can be called “bank rationalisation” in order to avoid the “n” word. Under this scenario, the government would take possession of insolvent banks. This is not interference with the market. It is the market. Bankrupt banks go out of business, but due to their importance to the economy, we can’t let them be tied up in bankruptcy proceedings for years.
Dealing with the matter all at once can both allow for a quicker fix to the financial system and also ensure fairer treatment of bank creditors. First, the shareholders of bankrupt institutions must be forced to eat their losses. However, we may not want to honour all the debts of the banks at 100 cents on the dollar, which has been current practice.