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Few things about the banking crisis are clear even to the experts, and sadly the things that do seem clear, taken together, only compound the problem. One is that hundreds of billions of dollars of further taxpayer support, at least, are going to be needed to revive the financial system. Another is that taxpayers are deeply reluctant to pay one more cent. The gap between those facts is very wide, and fury over American International Group's bonuses has made it even more difficult to bridge.

Remembering what is at stake, it is surprising what a big role mere words can play. "Bonus," for instance. If the contracts offered to the financial engineers of AIG had simply promised so much cash in return for so many months of work, they might have aroused little controversy, even if the sums involved had been as large. What ignited the outrage was the idea that taxpayers should finance a bonus -- a special reward, as if in recognition of exceptional performance -- for the very people who helped destroy the firm in the first place. It does not matter that the promised payments were never intended to be bonuses of that sort. The word added insult to injury.

Another nuisance word that arouses irrationally strong feelings even though nobody seems to know quite what it means is "nationalization." One prominent school of thought holds that the administration's dithering over its financial rescue plan comes down to reluctance to use that dreaded term. The country's big insolvent banks need to be taken into immediate, outright, and temporary public ownership, in this view. Shareholders would lose everything, management would be replaced, and government would call the shots on lending policy, pay, and everything else until new private owners could be found.

In the long run, this would cost taxpayers far less than the present muddle, many argue. But much as voters hate bailing out banks with cash that promptly leaks abroad, or into bonuses, or who knows where, President Obama's Treasury Department apparently assumes that Americans hate "nationalization" even more.

You could argue that since AIG is now mostly owned by the government, it has already been nationalized. All that remains is for the government to admit to it. Yet, as House Financial Services Committee Chairman Barney Frank, D-Mass., said on Tuesday, taxpayers are carrying the burdens of ownership without the privileges. Those missing prerogatives include the right to renegotiate controversial employment contracts. So you could say that Treasury's timidity about nationalization is not only delaying the correct solution but, by making it harder to control the bailed-out businesses, also undermining public support for bold intervention.

Meanwhile, the administration's critics add, uncertainty weighs on the financial system and the broader economy. The combination of government guarantees and taxpayer handouts gives banks an opportunity to "socialize" losses while channeling any gains to their shareholders and managers. From the taxpayers' point of view, the incentives in this setup are all wrong. It is a formula for bad lending practices. This scenario is part of what went wrong in Japan during the 1990s, many economists argue -- part of what cost that country a decade of growth.

In fact, however, Treasury has better reasons than mere timidity to be leery of outright temporary nationalization. This course sounds like the simplest way forward, but in practice it would not be, according to Alan Blinder of Princeton, a former deputy chairman of the Federal Reserve Board. He wrote in The New York Times that if the government decided to nationalize, it would first have to decide where to draw the line. That is not an easy question. The United States has more than 8,000 banks, many of them healthy.

Also, Blinder says, you have to consider the domino effect. Banks that were not nationalized would be at a disadvantage in attracting deposits, so their profits would fall; banks on the margin might soon have to be nationalized as well, and so the margin would drift. There is the sheer management challenge, as well. He points out that the government of Sweden, which dealt with a banking crisis promptly and by all accounts quite successfully through nationalization, had to contend with far fewer and far simpler banks.

Blinder favors the "good-bank, bad-bank" approach. The idea is to create an entity like the Resolution Trust Corp. that helped clean up after the savings and loan crisis of the 1980s. Backed by taxpayers' capital, this bad bank would acquire other banks' toxic assets. Once relieved of that burden, these banks would become healthy good banks and could lend more freely again, restoring the flow of credit to the economy.

As this column closed, Treasury still had not announced its detailed proposals. Judging by what the administration has said so far, it seems to have in mind a hybrid of limited nationalization and "good-bank, bad-bank" -- with added complications.

Treasury Secretary Timothy Geithner intends to create a public-private partnership to acquire tainted assets, not a straightforward RTC-like bad bank. The biggest banks, moreover, will have to face "stress tests" to judge the extent of their capital shortfall. New capital would be injected into banks that Treasury judged weak enough to need it but strong enough to increase their lending once they were recapitalized. In due course, this capital could convert to common equity in the banks, giving taxpayers an ownership stake. This method mitigates or delays some of the pitfalls of instant outright nationalization, including the domino effect, while retaining some of the benefits: Taxpayers could acquire a share of the upside.

Instead of rapid outright nationalization or an orthodox government-owned bad bank, Treasury is therefore proposing: a) a scheme for injecting capital that could become nationalization, with b) a public-private bad bank to mop up toxic assets in the meantime.

The idea that private investors can help Treasury solve the puzzle of pricing the toxic assets is unpersuasive.

The first part deals with Blinder's objections to hasty nationalization. The second part recruits the private sector to help in valuing the toxic assets and, more important, seeks to draw private money (from private equity funds and other investors) into the process. The more private money that Geithner can attract, the less new public money he will need to spend -- which in the current climate is a big political advantage.

The catch is that the private investors will want a good return, and the administration will have to provide that either by shielding them from some of the risk of the toxic assets, or by helping to finance their investment, or both -- and those measures, of course, also have implications for how much risk and cost taxpayers will eventually have to bear.

It is a complicated compromise, to be sure, but is it a good one?

The administration's critics suspect its motives -- unfairly, I would say. They see the failure to move promptly on nationalization as a want of nerve or a delaying tactic, as though Geithner believes that if the problem can be kicked far enough down the road it will go away. And they regard the public-private bad bank as an ultimately expensive way to avoid making the case to Congress and the public for further huge outlays on bank rescues.

For all the reasons that Blinder states, nationalization is not the easy fix that some of its more enthusiastic advocates appear to believe. Also, there is an exaggerated certainty in the pro-nationalization camp on the question of how deeply insolvent many of the big banks are. In many cases, this certainty is paradoxical too, because many pro-nationalizers are skeptical about the ability of markets to price assets accurately.

Yet the view that the big banks are insolvent and would remain insolvent in any plausible scenario relies partly on believing that the market that prices toxic assets, currently marking them down to, say, 20 cents on the dollar, is a good guide. If that market is suffering a temporary derangement -- and other ways of measuring those assets' value suggest that it is -- then an improving economy and the passage of time might indeed improve its assessment.

I think it is harder, though, to defend the public-private bad bank over a more straightforward RTC-type entity. The idea that private investors can help Treasury solve the puzzle of pricing the toxic assets is unpersuasive. The value of those assets to private buyers will be decided by the terms of the implicit public guarantee or subsidy. The government might just as well act alone and pay what the market says the assets are worth. Without private capital, more public money will be needed to recapitalize the system -- and therein lies the political challenge. In return, though, the taxpayers get the whole of the upside when the assets later come to be sold.

For the moment at least, the government can borrow at very low interest rates, so it is hard to see why it would want to reject that deal -- were it not for the fact that the public is so fed up with bank bailouts. A difficult policy to explain to voters, all right, but nobody said that being president was easy.