There is a question journalists ought to be asking members of Congress, in good part because of a new study (pdf) by two economists that say they generally do not, that they encourage bad banking practices and they mostly just transfer wealth from people to bankers.

The study, a work in progress known as a working paper, is by two economists at the International Monetary Fund who studied 42 banking crisis in Britain, Japan and the rest of the world over the last 37 years.

The study, the IMF notes, is not official policy. OK. But the findings of economists Luc Laeven and Fabian Valencia should give us all pause about out government moving with all deliberate speed to borrow $700 billion.

First, Laeven and Valencia says that when a banking crisis exists quick action is required. But they then warn that no one really knows what to do in such cases:

Choosing the best way of resolving a financial crisis and accelerating economic recovery is far from unproblematic. There has been little agreement on what constitutes best practice or even good practice.

Then they warn:

Central to identifying sound policy approaches to financial crises is the recognition that policy responses that reallocate wealth toward banks and debtors and away from taxpayers face a key trade-off.

Such reallocations of wealth can help to restart productive investment, but they have large costs. These costs include taxpayers' wealth that is spent on financial assistance and indirect costs from misallocations of capital and distortions to incentives that may result from encouraging banks and firms to abuse government protections.

Those distortions may worsen capital allocation and risk management after the resolution of the crisis.

Institutional weaknesses typically aggravate the crisis and complicate crisis resolution.

Bankruptcy and restructuring frameworks are often deficient. Disclosure and accounting rules for financial institutions and corporations may be weak. Equity and creditor rights may be poorly defined or weakly enforced. And the judiciary system is often inefficient.

Assuming there is a crisis, is giving $700 billion to one man with minimal oversight (and originally the demand was for no oversight by Congress or the courts) the only option?

There are other options.

One has been put forth by economics professors Larry Kotlikoff (an expert on savings) and Perry Mehrling involving the government selling default insurance to banks for cash (which they would borrow from the government) or by giving government preferred stock.

I think we should also consider creating a new, and temporary, chapter of the bankruptcy code. Why? Bankruptcy courts are practical and they focus on how to clear away dead wood, revive the ailing and moving forward. Given how some Republicans have demonized judges (and taxes and journalists) that may be a hard issue politically, but practically it would be cheaper than what is on the table.

Here is a suggestion, in line with the last line in my two most recent books, Free Lunch and Perfectly Legal: Reform begins with you.

Call your Congressman and senators.

And then call your local newspaper (and maybe the big ones like the NYT, WSJ, WashPost, LATimes) and other news outlets ask them to go out and commit real journalism and to not just take the politicians' word for it.