Opinion: A Plan to Resolve the Banking Crisis

Then, as now, the goal was to avoid the unnecessary and excessive taxpayer costs of an immediate resolution. Today's version of the certificate program would allow banks and bank holding companies, ranging from Citigroup (C), Bank of America (BAC) and Wells Fargo (WFC) down to small local banks, to issue preferred stock to the FDIC that would count as Tier 1 capital in exchange for full faith and credit government notes issued by the FDIC, an unassailable asset on the balance sheet. Participating banks would have the capital necessary to restructure and resume lending. As in the past, there is no debt issuance required by the Treasury. Existing examinations and oversight in conjunction with stress testing will enable the Federal Reserve and the FDIC to monitor individual institutions and ensure progress in restructuring and new lending. To the extent a bank's losses prove insurmountable or the institution is not progressing with restructuring and facilitating new lending, the FDIC can resolve the institution on its timetable with an orderly distribution of assets and liabilities.

Such a program can be enacted quickly under existing authority, provides government control of the crisis and participating institutions, can be applied to banks of all sizes and locations -- local, regional and money center banks -- ensures their ability to facilitate an economic recovery, enables the government to utilize existing resources at both the bank and regulatory level in the resolution of problem assets, and can be accomplished without exacerbating our fiscal deficit. Implementing this plan, in conjunction with the programs already announced and underway by the Administration, can successfully steer our economy back to the path of growth and prosperity.

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