Are the banks already "nationalized?" My friend David Reilly over at Bloomberg penned a piece this morning saying it's already happened. But then the obvious response is, if we are nationalized, then why is there still independence? Why is Vikram Pandit able to say he wants to keep Banamex (which he should), and why is Wells Fargo (WFC) able to pay that huge dividend, a totally inconsistent payout that Peter Eavis highlights today in an excellent piece about capital ratios and how Wells' is inferior to JPMorgan's (JPM) yet only JPM cut the dividend. And why are the same boards of directors and officers that ran Citigroup (C) and run Bank of America (BAC), the two acknowledged problem kids (at least acknowledged by the banks), still there if we are nationalized? Which brings us to the semantics of the situation. Reilly points out we have nationalization of the system but no seizures. That's an oddity given that Sheila Bair -- my guest today on CNBC, on a show that runs tonight at 10 -- was actually nationalizing banks, in the "seizure" sense of the word a few months ago to prevent runs on the banks. In retrospect, did we need to do that? Did we need to truly nationalize, and how (speaking of inconsistencies) could we not seize BankAtlantic (BBX), Corus (CORS) or Bank United (BKUNA) and yet seize WaMu and Wachovia? How did those banks not get seized and WM and WB did? Oh, and while we are at it, why did the government seize the deposit institution that was Lehman -- it had billions in deposits -- and not seize AIG (AIG), which had no deposits and was totally rogue? All of these must be on the agenda. Someone has to clarify what the heck happened. Someone has to explain whether the principal method of bank funding -- preferreds -- gets wiped out, because if you wipe out preferreds, you are seizing and "nationalizing" in the old sense of the word is here. I am puzzling over all of this, because last night Obama talked endlessly about the need for private investment, but if you seize big banks, why not wait until the government gives away the good parts and keep the bad parts? Without clarity, say, on Citi, why not wait until it is seized and then hoodwink the government with a lowball bid for Banamax or for the clearing business or any number of the well-run execution pieces of the pie of Citigroup? What the government has done is FROZEN investment in banks, because by waiting for the banks to be shorted down to oblivion and perhaps causing runs, the ostensible reason for the seizure of WM and the attempted seizure of WB, the private sector gets the best of all worlds: It cherry-picks the goodies from the government and it doesn't have any risk. That's where we are. Unless Treasury and the Fed and the FDIC get into a room and offer what happens if a bank fails a stress test -- seizure, change of boards, wipe out of the preferreds, cram down of the bonds, a sell and breakup to JPM and Goldman Sachs (GS) and Newco (a fictional bank created by privateering private equity people) -- we are not going to get to the world that Obama outlined last night. Which means, again, the trick is to watch the ProShares UltraShort Financials (SKF) ETF, watch the trading in the PowerShares Financial Preferred (PGF), the bank preferred ETF, and keep shorting, because the lower the banks go, the more likely that Tim Geithner tells his favorite reporters that any capital injection wipes out what's left of the common!

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