American democracy got a gift this weekend: Public radio's This American Life broadcast the latest in its series of deft, dynamic primers on the financial crisis.
"Bad Bank" -- the show's excellent new episode -- is available as a free download. Download it. Then listen. Actually listen. Seriously. What else are you going to do with the next hour? Go snowboarding down a graph of the Dow Jones Industrial Average?
"Bad Bank" makes two points that might not be news to the hordes of people who got better grades than me in Intro to Econ:
1) Banks that take government bailout money and then refuse to lend the money out to would-be homebuyers are not just being greedy or stubborn. They are being rational. If you were deep in a financial hole and someone gave you a wad of cash, would you feel like loaning the money out? Right. Me neither. So we're at a moment when our most massive banks are so screwed that it would be irrational for these banks to do what banks do: lend money, charge interest, and make money. They're that screwed.
2) These banks aren't merely screwed because customers can't pay their mortgages. Banks are screwed because the houses attached to those mortgages are not worth as much as the original loans. So grabbing the house and selling it off doesn't fix the problem.
Now, can I promise you that these two key points from "Bad Bank" make economic sense? I cannot. As I said, I was a crappy econ student -- so crappy that I've written my previous HuffPosts about the financial crisis under the reassuring, authoritative title "Ignorant Questions from a Confused Citizen."
But let's just assume those two key points are accurate. We're not setting policy here. We're just asking questions. Even toddlers get to ask questions. So how dangerous could a question be?
Here, after listening to "Bad Bank," is my big question: Can trickle-up economics save the banks? Now, I say "trickle-up" but it might be just as accurate to say "trickle-sideways." The point is that it's trickling. You put the money in one place and it trickles benevolently to some other place. Ronald Reagan once wrote a charming fairy tale with a similar premise.
Anyway, why do I think trickling might save the banks? Because any policy that boosts demand for foreclosed houses will raise the prices of those foreclosed houses. Rising prices would allow the banks to sell off the foreclosed houses at less and less of a loss. As far as a balance sheet is concerned, avoiding the loss of $1 is as good as being handed $1.
At least to my subpar mind, it seems logical then that the greatest good can come from circumventing the most doomed banks for now. The government needs to save jobs, create jobs, and also make lending happen. Smart home loans to people with secure jobs would boost demand and bolster home prices and ultimately make things less bad even for those banks that got us into this mess by making the most foolish of loans.
The government could revive lending by funneling money through any banks that have managed to be relatively sane and responsible through this fiasco. It could revive lending by giving startup money to new banks that agree to follow prudent practices. Maybe it could even revive lending by means of that dreaded word: nationalization.
Consider one of the voices heard during the "Bad Bank" broadcast, the voice of a former chief economist for the International Monetary Fund: "What would the U.S. tell the IMF to do if this were any country other than the U.S.? If you covered up the name of the country and just show me the numbers, just show me the problems, you know, just talk to me a little about the politics in a generic way, I know what we would do. I know what the advice would be. And that would be: Take over the banking system, clean it up, re-privatize it as soon as you can."
Unappetizing? Maybe. Un-American? Yes, some would certainly shriek exactly that.
But "Bad Bank" leaves you feeling that there's no win-win-win solution waiting out there in the world. Losing less badly is as close as we're going to get to winning for a while.
Huffington Post blogger David Quigg lives in Seattle. Click here for an archive of his previous HuffPost work. Click here to follow his obligatory Twitter feed.