Shhhhh ... Don't Tell Anyone

A respected economics writer is blogging today about a conversation he had with a "respected" insider who is saying that the U.S. banking system is on life support and that plans are being made for a quasi-nationaliztion of the banking system to avoid meltdown:

Unfortunately, I can't use many of the specifics he conveyed, but he is a very upbeat sort by temperament but also has been studying the banking/credit mess. He sees us going down the Japan path. Banks will not be technically bankrupt, but will have so many bad assets on their balance sheets, and will have taken hits to their equity bases, that 18 months from now they will be unable to make new loans. They will be quasi nationalized. BTW he said this in a completely evenhanded fashion, as if he was giving a weather report.

This, mind you, comes from someone who has written frequently for the American Enterprise Institute and tells me the Treasury and the (sic)Feds are working on this scenario now. This is far more dire than any forecast either yours truly, a constitutional skeptic, or even uberbears like Nouriel Roubini, have been putting forward.

Let this be an unfounded rumor.