First Septic Bank (revisited)
Bank of America did the world a favour by acquiring Merrill Lynch last autumn, at the height of the global financial terror about whether any bulge-bracket Wall Street firm could survive.
So the US government was never going to cut up too rough when the biggest lender in America asked for a bit of additional help in absorbing the losses incurred on Merrill's holding of poisonous assets.
But the overnight announcement on the bailout of B of A would have been viewed as the stuff of public-finance nightmares a year ago. Today, it's almost par for the course that US taxpayers are injecting $20bn of new capital into the bank and promising to absorb most of the future losses on $118bn of radioactive investments.
Those financial commitments are peanuts of course in the context of $14,000bn-and-rising of financial support that taxpayers have provided to banks all over the world. What's gone wrong with our banks is without historical precedent - but then, you knew that.
One manifestation is banks' results for 2008. What till recently was the world's biggest bank, Citigroup, will disclose horrible losses later today. And next month, we'll see unprecedented losses from Royal Bank of Scotland and from HBOS.
At those banks that have managed to remain in the black, profits have collapsed.
But have no fear. They can't collapse - because we as taxpayers are implicitly underwriting the lot of them. Full nationalisation remains the economic insurance policy of last resort (as shown by Ireland's nationalisation of Anglo Irish Bank).
So what are the interim measures that governments can take, to keep banks afloat and stave off full nationalisation?
One element - but only an element - is to take further steps to improve the flow of funding to them.
We'll probably see some of that announced by the Treasury and the Bank of England next week - partly because there's a deadline set by the end-of-January closure of the Bank of England's Special Liquidity Scheme, which allows banks to swap hard-to-sell mortgages for easy-to-sell Treasury bills.
A new scheme will be put in place that is likely to permit banks and other financial institutions - probably to include the finance arms of motor manufacturers - to exchange all manner of loans to homeowners and consumers and businesses for Treasury bills.
In simple terms, you can see it as taxpayers lending to individuals and companies, or taxpayers financing the real economy.
And on top of that, a sovereign wrap is expected to be put around certain categories of bond - including debt issued by certain big companies (see "Taxpayer support for big companies") and bonds created by packaging together mortgages.
You should view that initiative as taxpayers providing an insurance policy to purchasers of those bonds that they won't lose out if the borrowers can't pay or won't pay.
The details should be nailed down in the coming days. But the broad thrust, bankers tell me, is useful.
That said, as we've seen with the Bank of America debacle, there are two other issues confronting all banks.
Have they got enough capital to absorb the losses being incurred on loans that are going bad?
And can they be remotely confident that they can estimate quite how many loans will go bad, and how big the consequential losses will be?
The arrival of a painful recession, of uncertain length and depth, makes that calculation almost impossible.
Guess what? We as taxpayers are going to have to ride to the rescue yet again.
As I've been saying for the past few weeks, one option under consideration is the creation of a state-owned toxic bank, into which our banks would transfer their stinky assets.
As a concept, some City chums and I branded it last autumn as the First Septic Bank.
It was top of the US Treasury Secretary's agenda in September, but was never implemented in the US because the technical obstacles are huge.
As it happens, Obama's team is having another go at creating the First Septic Bank, and a British version - the Royal Septic Bank - is also under consideration.
But the First Septic Bank of America and the Royal Septic Bank of Great Britain may yet fail to be born.
Because there are huge difficulties in valuing the assets to be placed in them and in defining the assets that may be placed in them.
If you put too high a price on the stinky assets, taxpayers end up massively out of pocket.
If you undervalue the assets, banks are mullered.
It's a nightmare.
There are other ways of exploiting taxpayers' deep pockets to achieve the same outcome - such as the guarantee being provided to Bank of America (which had already been given to Citigroup) that taxpayers would underwrite a proportion of losses on toxic assets retained by the bank.
The most creative solution I've come across has been made by Sir Peter Burt, the veteran Scottish banker who was chief executive of Bank of Scotland in its glory days but recently failed in a campaign to keep HBOS out of the clutches of Lloyds TSB.
Burt is proposing a sale-and-leaseback of toxic assets. Which probably sounds like gobbledegook to you. So I'll address it in more detail in a forthcoming note.
Suffice to say for now that a sale-and-leaseback between the banks and the state has two supreme advantages: there's no need to value the poisonous assets; and losses on those stinky assets would be absorbed by the banks in manageable chunks over about 10 years.
The Treasury is reviewing the options and I would not expect it to opt for one or t'other for some time.
But the bad news or good news (depending on whether you're a taxpayer or a banker) is that we as taxpayers will end up in some way paying for the stupid loans and investments made by smart bankers.
(Note from BBC blog admin: apologies for the hiccups in publishing this post this morning.)