The case for nationalizing a few of the biggest banks gets simpler the more complicated their role is in the current financial crisis.

We should nationalize Citigroup and Bank of America and JP Morgan Chase not only because they deserve to be but also because doing so would help untangle the knot that has been tightening around the throat of the American economy.

First, a truly nationalized bank could start lending right away. It wouldn’t have to worry about toxic assets weighing it down because it would have the U.S. Treasury behind it. The government could set fixed criteria for lending, and then government bank managers around the country could start the lending process right up.

Second, by nationalizing the three biggest banks, the government could lessen the problem of all those credit-defaults swaps that are weighing down the balance sheets of the banks. These banks were some of the biggest peddlers of these swaps and other derivatives. (See MarketOracle.com)

Some of these deals were among the banks themselves. If the government owned the top three banks, it could nullify their inter-bank swaps overnight, since these would be debts the government would now owe to itself.

And third, if we owned the banks, we could give much more favorable terms to GM and Chrysler on the loans that these banks had given them.

At the moment, for instance, JP MorganChase and Citigroup are refusing to write down Chrysler’s debt to them to about 15 cents on the dollar, the New York Times reports. They, along with Morgan Stanley and Goldman Sachs, are some of the biggest lenders to Chrysler.

But if we owned the banks, we could write that debt down or forgive it entirely and the car companies and their workers could breathe a little easier.

Even using the leverage that Treasury has at its disposal today, it could force the banks to forgive their loans to the auto companies in exchange for getting bailed out themselves.

Instead, we’re bailing out the banks, and they’re refusing to bail out the auto companies.

That makes no sense whatsoever.

We, the taxpayers, have given Citigroup at least $45 billion in federal investments, and about $250 billion (!) in guarantees. We’ve also given at least $60 billion to JP Morgan, Bank of America, Morgan Stanley, and Goldman Sachs combined.

We’re doing them an enormous favor—hell, we’re keeping them alive!—and yet they’re not doing Detroit—or the autoworkers or the U.S. economy—a favor in return.

We can make them an offer they can’t refuse.

Yet they are the ones who are acting like gangsters. (See Will Greider in The Nation.)

At some point, Obama must come to terms with the power he has over these banks—and use it.

Otherwise, they will drag him down, and the economy with it.