Alan Schwartz thought he could do it. And so did Ken Thompson. And so did John Thain, Dick Fuld and even Angelo Mozilo. All of them thought they could outrun it. That it was just a credit cycle. They had liquidity. They had capital. They had great brands.

And yet today their firms, despite their assertions to the contrary, are gone. But I'm sure on a psychiatrist’s couch, each would say “I thought I could outrun it.”

But it isn't a normal credit cycle correction snowball. It's an avalanche.

And unfortunately, as we're now witnessing, all the liquidity in the world can't outrun an avalanche.

What we need now, and have needed all along, is more capital. Not the hybrid stuff, but the evisceratingly dilutive common equity stuff. Solid ground on which you can rebuild a capital structure. Not senior debt below which you have layer after layer of quicksand.

This afternoon, Ben Bernanke announced that he welcomed ideas as to how to reopen the credit markets. Well, here are mine:

1. Establish a moratorium on all US bank common and preferred dividends. Sorry, but we need all the capital we currently have in the system.

2. Declare insolvent all banks on the FDIC and FSLIC problem bank list and merge them into a stronger financial institution (any bank with assets larger than $20 billion whose September 30th Tier 1 capital ratio is less than 8%).

3. Take the $700 billion authorized by Congress and put it as common stock into any bank sufficient to raise the systemwide bank Tier 1 capital level to at least 10%. Then go back to Congress and get authorization for another $500 billion, just in case.

4. Establish a marketplace for the public trading of toxic debt; however, don't provide government funding to purchase the assets. This will begin a flooring process. Tell banks they have 12 months to get the bad stuff off the books. And as assets are sold at a loss, commit to using the $500 billion in additional funding. Agree to “make whole” all financial-institution Tier-1 capital ratios at no less than 6% through 2010.

5. Go raise super senior preferred stock from the private sector and pay market rate dividends on it.

That’ll get you started. And with a strong base, we can rebuild a banking system that all Americans can once again be proud of.