by Zach Carter, Media Consortium MediaWire Blogger

In this week's Audit, we're examining Treasury Secretary Timothy Geithner's thoroughly uninspiring bank bailout plan, which fails on almost every level. What's more, some of the most insightful (and stinging) critiques of the proposal are coming from progressive media.

Robert Kuttner offers a strong analysis of Geithner's strategy to salvage the banking industry in The American Prospect, noting that Geithner is explicitly avoiding the simplest and cheapest solution in favor of propping up the current Wall Street regime. The current plan is designed to support a financial architecture that has proven completely ineffective in maintaining the nation's basic economic functions.

Geithner has thus far refused to nationalize the big, insolvent U.S. banks and give taxpayers ownership authority in exchange for their financial assistance. Instead, the new Treasury Secretary's proposal devotes $1 trillion to writing insurance policies on bad mortgage assets to encourage private companies to buy those assets from troubled financial firms. This complicated strategy is designed to reduce the amount of money the government will have to pay to save the financial sector by bringing private enterprise into the bailout. However, the sheer convolutedness of the plan makes it much less efficient than temporary nationalization would be. Instead of simply putting a troubled bank's balance sheet in order, the government now has to make sure hedge funds and private equity companies can profit from the move. The end result? Showering more taxpayer dollars on Wall Street.

As Matthew Rothschild highlights in The Progressive, the government's current commitments to banks exceed the stock market values of those banks. Citigroup has received over $50 billion in direct capital injections, plus insurance on $300 billion worth of assets, but the company could have been purchased outright for well under $20 billion since October, 2008.

The worst part, Kuttner notes, is Geithner's seeming determination to rehabilitate the failed loan securitization network, in which loans are packaged into securities and sold to various investors. Loan securitization encouraged excessive risk-taking on Wall Street, spawned millions of predatory mortgages and turned the simple process of buying a home into an absurd game of hot-potato amongst speculators. The loan securitization system needs to be carefully dismantled, not restored. "Geithner, using public funds, hopes to restart the engine of loan securitization," Kuttner writes. "In effect, he wants to rebuild the very model that caused the crash."

Nobel Prize-winning economist Joseph Stiglitz argues that much of the resistance to nationalizing the nation's largest banks is based on a misunderstanding about how the nationalization process works. In an illuminating interview with Talking Points Memo, Stiglitz states that banks fail all the time and are placed into government hands to be disposed of. Lately, a handful of banks have failed every week.

"Banks have failed over and over again in the history of America, in the history of capitalism," Stiglitz says. "To mention some recent examples, Washington Mutual went into bankruptcy, a number of banks went into bankruptcy . . . . It didn't lead to a fundamentally systemic problem."

When this happens, the government either takes the bank over for a short period of time and sells it to another bank, or liquidates the failed bank's assets. The nationalization solution that progressive economists are pushing is simply the first approach. The nationalized bank is even kept open while its books are put in order, and when its affairs are straightened out, the government sells the company back out into the marketplace. The FDIC has decades of experience with this kind of operation.

Merely patching up the old economic model will not only fail to loosen Wall Street's grip on the economy, it will also turn a blind eye to the severe ecological challenges we face. As the authors of Right Relationship: Building a Whole Earth Economy, Peter Brown and Geoff Garver, write in a blog for The Huffington Post, unlimited growth and production is nonsensical in the context of finite natural resources. Taking the environmental crisis seriously will mean not only investing in technology to fend off catastrophe, but cultivating a culture that places value on sustainable lifestyles.

Geithner offered a few vague comments about averting foreclosures in his bailout roll-out last Tuesday, but the glacial pace of government-sponsored foreclosure relief may mean that it's time for more direct action. Last month, Rep. Marcy Kaptur, D-Ohio, called for evicted home-owners to exercise squatter's rights and refuse to leave their homes. In the Nation, Nicholas Von Hoffman proposes organizing community groups to take a stand and block banks from repossessing homes.

While the current economic crisis looks much like the early days of the Great Depression, those hit hardest by today's downturn have a few more tools to weild—most notably, the Internet. If the Treasury Department will not save the people from Wall Street, the people can, and should, save themselves.

The situation is already dire. As James Ridgeway writes for Mother Jones, today's sky-high jobless statistics mask the actual number of people enduring tough times. While the official unemployment rate is at 7.6%, far more people who have given up looking for a new job or are stuck in part-time positions. If those people are included in the metric, the rate soars to 13.9%.

Geithner is scheduled to release more details on his bank bailout on Wednesday. Let's hope the second time is the charm. Keep your eyes on the Weekly Audit for independent media's response.

This post features links to the best independent, progressive reporting about the economy.