I do understand the ripple effect that it could have to have the banks fail utterly, but I would think that if they entered insolvency, like a Chapter 11 rather than Chapter 7 bankruptcy, that the disruption could be managed. As far as the mortgages go, eliminating the debt and transferring ownership to the residents would effectively solve that part of the problem (aside from the irrationally angry people who seem willing to suffer harm themselves rather than tolerate the notion that someone else got some 'undeserved' benefit) without spreading disaster. And, obviously, reigning banks back to only lending 2x to 4x their holdings rather than the 30+x they were running at, or some other number actually supported by financial statistics, seems like it would be a good idea.
I know that the modern conception of business since the 1980s is that if the profit margin of a business is not growing that it might as well close its doors, but once it is recognized that the banks are doing more than simply engaging in commerce, but are actually providing infrastructure necessary to maintain our society... it certainly seems their classification ought to change, especially given the historical proof of the power of money to corrupt. It just doesn't seem to make sense that it could be both critical infrastructure and also something that should remain private with as light a touch as possible from government (viewing government as a hand through which the public can act to protect themselves, I know that's not always how it shakes out).
