Today's Journal reports that the government is already looking into plan B D for Citigroup, which could include the dread "bad bank," in which the government strips out Citi's toxic assets and tries to sell them at a profit later on:

Barely a week after the third rescue of Citigroup Inc., U.S. officials are examining what fresh steps they might need to take to stabilize the bank if its problems mount, according to people familiar with the matter. ...

One possible future step could involve creating a "bad bank" to take distressed assets off the balance sheet of Citigroup or other troubled financial institutions. Differing approaches are still being considered. Treasury officials already are developing a public-private partnership to tackle that problem more broadly, and the two concepts could either run parallel or be merged.

Relatedly, there's this remarkable paragraph:  

Citi executives said they haven't detected signs of corporate clients or trading partners withdrawing their business, even though the New York company's shares are hovering near $1 apiece -- closing Monday at $1.05 on the New York Stock Exchange. Citigroup says it has a strong liquidity position and that its capital levels are among the highest in the banking industry. [emphasis added.]

Uh, is that before or the government converted $25 billion of preferred shares (essentially a loan) into common stock last month, so as to shore up Citigroup's anemic capital base? If Citi's right about the rest of the banking industry, we're in even more trouble than we thought...

Finally, the Journal also had this interesting nugget:

The Obama administration is trying to counter criticism that its efforts to stabilize financial markets have been unsuccessful. In a private meeting Monday night with House Democrats, Treasury Secretary Timothy Geithner said the administration's efforts were working, and said policy makers had "done more in weeks" to address problems than other countries had done in years, according to a senior House aide who attended the meeting.

P.S. Yeah, yeah, the Vikram Pandit memo. All I can say is, talk to me when Citi's off life support.

--Noam Scheiber