Yglesias tweets: "Alternate 2009: Obama nationalizes insolvent banks and appoints turnaround specialist Mitt Romney to reorganize them."

Most shocking thing in the Lizza article is the following (for me at least):

On February 5, 2009, just as Obama was negotiating the final details of the stimulus package, Summers and Timothy Geithner, the Treasury Secretary, drafted a memo to the President outlining a plan to save the collapsing banks. TARP, they believed, wouldn’t be enough. Seventy per cent of Americans’ assets were in four banks, three of which were in serious trouble. If the situation worsened, Obama might need to nationalize one or more institutions that were “at the doorstep of failure.” Indeed, “there is a significant chance that Citigroup, Bank of America, and possibly others could ultimately end up in this category.” Nationalization would expose the government to enormous financial risk and political peril. Obama would be forced to take “actions to get the government a dominant ownership position,” and the banks would then “be subject to substantial restructuring and government control including the replacement of long-standing top management and long-standing directors.” It was unclear whether such a takeover was legal. Moreover, there was a “real risk” that seizing control of banks could, in fact, destroy them.

Obama would need congressional support if he pursued nationalization. Geithner and Summers recommended that, if necessary, the F.D.I.C., which provides deposit insurance to millions of Americans, be used to take over the troubled banks. The F.D.I.C. was partly funded by small community banks, which garnered more sympathy than Wall Street firms.

They warned Obama, “We may, by being proactive, be blamed for causing the problems we are seeking to preempt. Further, there is the risk that by attempting a program of this kind, we will pull the ‘band-aid’ off a wound that we lack the capacity to sterilize and thus exacerbate problems.”

The plan was dropped in mid-March after a scandal erupted over lucrative bonuses paid to executives at A.I.G. At a pivotal meeting, according to the notes of someone who participated, Emanuel warned the President of “sticker shock” in Congress, and, he said, “There’s just no appetite for more money.” Obama, whose approval rating was still above sixty per cent, was more confident than his aides in his abilities to change public opinion and persuade Congress he needed the resources. “Well, what if we really explain this very well?” he asked. But the judgment of the political advisers prevailed. In hindsight, the case for nationalization was weak, but even if Obama had wanted to pursue it he couldn’t have. For the second time in as many months, a more aggressive course of action on the economy was thwarted by fears of congressional disapproval.

Zombie banks? Have they been a problem for the recovery? It's always Emanuel and Congress.