This is a problem for the U.S. government, which has decided that a healthy economy depends on delaying a recession that will result from the credit crunch that will ensue when the country's biggest bank can't afford to lend any more money.

The Times article offers this insight -- the Treasury's plan is a Citigroup bailout. Since Citigroup operates the four largest SIVs and could be on the hook for $80 billion -- which happens to be the size of the Treasury's proposed Super SIV -- it is clear that if the fund could buy Citigroup's SIVs, it would minimize the amount of capital that Citigroup would need to write off.

But the Super SIV is hardly a done deal -- which tells me that its announcement was a lame PR move gone bad. That's because the interests of the supposed participants are not aligned. For instance Bank of America (NYSE: BAC) and JPMorgan Chase (NYSE: JPM) -- two other big participants -- do not operate SIVs. However, they do run large money market funds that invest in them. So they really don't need a bailout as much as Citigroup.

In fact, given that JPMorgan Chase CEO Jamie Dimon was canned from Citigroup years ago, he must be secretly enjoying the pain that Citigroup is suffering right now. So he will surely hold out for some very high fees and profitable trades as a condition of participating in the Super SIV.

But the biggest disappointment here is that the Treasury Department was unwilling to take a leadership role. Paulson either should have stayed out of it completely or forged a real solution and then announced it with all the participants.

Paulson's toothless response to the problem suggests to me that the history books will rank him near the bottom of the pantheon of Treasury secretaries -- far below the top position of his former Goldman Sachs Group (NYSE: GS) colleague Robert Rubin. Ironically enough, Rubin is tarnishing his brilliant Treasury legacy by remaining atop Citigroup and continuing to support its zombie CEO, Chuck Prince.

Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He owns Citigroup shares and has no financial interest in the other companies mentioned.