The nationalization argument keeps picking up steam, and it keeps making sense—at least compared the other harebrained schemes that have been tried or proposed.

Today, the Times lays out the issues facing the Obama administration on how to handle the financial crisis, which is worsening again despite hundreds of billions of dollars thrown at the banks in the last three months.

But if hundreds of billions of dollars of new investment is needed to shore up those banks, and perhaps their competitors, what do taxpayers get in return? And how do the risks escalate as government’s role expands from a few bailouts to control over a vast portion of the financial sector of the world’s largest economy?

We now have experts predicting Obama will have to nationalize:

“The case for full nationalization is far stronger now than it was a few months ago,” said Adam S. Posen, the deputy director of the Peterson Institute for International Economics. “If you don’t own the majority, you don’t get to fire the management, to wipe out the shareholders, to declare that you are just going to take the losses and start over. It’s the mistake the Japanese made in the ’90s.”

“I would guess that sometime in the next few weeks, President Obama and Tim Geithner,” he said, referring to the nominee for Treasury secretary, “will have to come out and say, ‘It’s much worse than we thought,’ and just bite the bullet.”

As usual, Barry Ritholtz gets right to the heart of what is really a scandal:

Note that the money already dumped into the black holes of these two financial institutions far exceeds their net worth. And in exchange for this foolish investment, taxpayers have received just 6% of Bank of America, and 7.8% of Citigroup. This is absurd. How a 120% of a company’s market cap yields a single digit ownership stake is beyond my comprehension.

The solution to the banks problems, as well as this ridiculous investment posture, is relatively simple: Nationalize the banks, appoint new management, give them 6 months to spin out 10% of each of the separate viable pieces, with the taxpayer retaining the rest as passive investors….

Stock holders get nothing; Since bond holders would receive some pro-rata share in a liquidation, they get a convertible preferred in the new debt free firm, as well as an opportunity to lend to the new banks at an generous convertible rate.

Sounds about right.

The Times pretty much all but says that nationalization is the least worst option here, but the paper unfortunately gives credence to the argument on Wall Street that bonuses and the like have to be paid to keep workers on the job.

And how would the government attract the best talent if it demanded that they take minimal pay — a political reality in the current environment?

Hey, these folks are going nowhere soon. Where else are they going to earn, say, a couple of hundred thousand dollars a year? The days of bolting to start your own hedge fund are over.

But that’s just a quibble. The piece is a solid bit of analysis overall.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.