This last week has found me mulling more than a cinnamon-spiced, Calvados-infused cider: is the government addressing the recession the wrong way?  Are they putting a Band-Aid on when a full cast is needed?

The massive sums of money, like reinforced concrete on rusting girders, attempt to cement large financial establishments.  These TARP funds are intended to defibrillate the system with capital to jumpstart credit lending again.  (Is anyone else about ready for these overwrought similes and metaphors to stop?  Apologies, dear reader.  By the way, have you ever seen ”defibrillate” used as a verb like that?)

The stimulus and TARP were sold as a full-blown effort to firm up and restore our economy, but two recent contrarian arguments in major media raise doubt.  And they are not noisy Republican yammerings about over-spending, socialism, and outsize growth in government.

Author and executive Peter Schiff was on the Daily Show explaining the “Toldja so” signs of collapse he saw before everyone else.  (The montage of him getting laughed at on cable news at 1:00 in the video below is a must-see.  Also, Jon Stewart catches him mulling a Republican run against Chris Dodd.)

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He asserts that we should have taken the diametrically opposite line of attack: let the banks go bankrupt.  They are not too big to fail, but rather “They are too big to bail out.  The economy would actually benefit from a lot of these bankruptcies.  Now we are suffering from all the bailouts.”

Schiff powers on through: “The credit crunch is part of the solution.  The problem was all the reckless credit that preceded it.  Y’know, when Barack Obama says [consumer] credit is the lifeblood of the economy, it‘s not the lifeblood.  It’s the cancer.”  The idea here is that an alternate emphasis would value savings over the reckless borrowing that occurred.  The credit crisis is a harsh, necessary, normalizing effect of the prior gilded age.

This is frightening but does make some sense.  By not rewarding negligent or greedy institutions that would fail without federal aid, a strong precedent for a sturdy, responsible future would arise.  The problem is that seeing all those firms crash would be psychologically terrifying, like when the buildings collapse at the end of Fight Club.  Instead, they have now seen they can get away with it.

The other argument came from Sandy B. Lewis and William D. Cohan, who have a credible mixture of brokerage, banking, and journalism experience between them, not to mention organic farming.  They ask, “Six months ago, nobody believed that our banking system was well designed, functioning smoothly or properly regulated — so why then are we so desperately anxious to restore that model as the status quo?”

Three of their points struck me.  First up, they opine, “We are sympathetic to the extraordinary challenge the president faces, but if we’ve learned anything at all two years into the worst financial crisis of our lifetimes, it is that a capital-markets system this dependent on public confidence is a shockingly inadequate foundation upon which to rest our economy.” 

Economics has a lot of behavioral and psychological traits, no doubt.  So, there is always an extent to which you are at the mercy of the perceived feeling of the market.  But it cannot be the sole arbiter of the economy.  Where is the FDIC-creating, system-revising, game-changer that will alter our long-term economic foundation for the better?  It may be controversial now (most of FDR’s programs were at the time) but it will pay off.

Next, Lewis and Cohan ask why have we assumed that we have gotten to the bottom of this instead of actually getting to the bottom of it?  The causes and levers of the crisis are not fully extricated, and financial culture has not done an about-face.  From personal experience, “We have both spent large chunks of our lives working on Wall Street, absorbing its ethic and mores. We’re concerned that nothing has really been fixed.”

Their suggestion: “Why hasn’t President Obama insisted on public hearings over what happened during this financial crisis?”

If Congress can rationalize bringing in the baseball commissioner on short notice, they can wrangle up some of these C-suite executives and leading Managing Directors and put them under oath.  After all, aren’t baseball and massive profits each as American as apple pie?

Give them immunity in exchange for honest testimony.  Prosecute them to the full extent of the law only if they lie.  It might turn into an unofficial perp-walk, but it would be valuable information.  “Not a single top executive of a Wall Street securities firm responsible for causing the financial crisis has had the courage or the decency to step forward in front of the cameras and explain to the American people in his own words exactly how and why he allowed his firm to cause the crisis.”  The remaining CEOs of Citibank and JPMorganChase, and the ousted ones from AIG, Lehman, Merrill Lynch, and Bear Stearns “have tales to tell about how this crisis got started and why.”  Some of these could even be closed-door Senate hearings.

Lastly, the authors suggest that “instead of getting guaranteed salaries or huge bonuses, [executives] should have the bulk of their net worth completely at risk for a long stretch of time — 10 years come to mind — for the decisions they make while in charge. This would go a long way toward re-aligning the interests of these firms with those of their shareholders and clients and the American people, who have been saddled with their risks and mistakes.”  This gets us somewhere on the road to change. 

It’s becoming very chic to criticize Obama, as long as you are not a hardcore conservative.  And this is no different.  But chic does not mean without substance.  Each of these critics asks challenging, provocative questions, but they do not jibe the president.  That is loyal opposition in practice.