Just as the movie "Blade Runner" lays out a stark view of the future, so a trip to Tokyo these days presents a glimpse into an alternative future for banking systems around the world.

In this alternative reality, banking doesn't work for economic development, consumers, or even bankers. In a sense, it just is. For Japan, though, the hard question is whether a banking system now focused solely on survival should be allowed to remain as is.

On July 2 the government announced another in a continuing series of plans to rescue the nation's banks and, perhaps more important, ensure a continuing supply of credit to its borrowers. The "bridge banks" are supposed to create a framework to weed out insolvent institutions, work out their bad loans, and put the rest of the industry on a sound footing from which to move forward.

Each of these steps has been urged on the Japanese government by many other nations, with the United States being perhaps the most vocal in its criticism of the procrastination and preoccupation that have so far prevented meaningful efforts to stabilize the financial industry. Reflecting this pressure, the Japanese have been engaged in an extensive study of the American savings and loan debacle, analyzing every detail of what is generally viewed as a successful program to restructure a nation's financial system.

Unfortunately, most of what the government appears to have taken away from its analysis is the form, not the content, of the U.S. approach.

Under the Japanese bridge-bank scheme, the government intends to conduct an exhaustive examination of the nation's 19 largest banks.

After the examinations take place, the new Financial Supervisory Agency will determine which banks-and there will almost surely be some-are insolvent. At that point, bank management will be instructed to seek a private-sector buyer. If none can be found, then the bank is taken over by the government and becomes a "bridge bank."

Under government management (though bank management may remain in place), the bridge bank then sets about sorting through the failed bank's portfolio. "Good" borrowers will continue to receive funds, but "bad" borrowers will-eventually-be cut off.

The government will seek a private buyer for the failed bank, with the deposit insurance system responsible for any losses resulting from the recognition of problem loans. In as many as five years, the bank will be closed if no private resolution attractive to the government reveals itself.

As noted, this plan is called a "bridge bank" and the Japanese government made much of the fact that it was modeled on a successful U.S. program.

But in fact the U.S. bank regulators have created only one bridge bank, and it was erected not to protect borrowers but to minimize the cost of resolution to the FDIC. Bank regulators generally rely more on the wisdom of the markets to sort out good from bad borrowers. The bridge was in place for a very brief period, after which the failed bank (Bank of New England) disappeared into another large institution and business went on more or less as usual.

The differences between the bridge bank in its U.S. reality and in its Japanese simulacrum tells one much about the differences between the two nations' banking systems and, indeed, about the countries themselves.

First, as noted, the U.S. version of the bridge bank relied on the market, not the government, to secure the flow of credit into the economy. This resulted in considerable disruptions, sometimes called the credit crunch.

However, the United States tolerates far more wear and tear on private entities than does Japan. Indeed, the extent to which a credit crunch actually occurred in the early 1990s remains a matter of hot academic dispute. Thus, while the United States accepts more uncertainty, it is not at all clear how much actually ensued.

Second, the U.S. approach to rescuing its financial system-in which the bridge bank played only a very minor part-emphasized two key elements clearly lacking in the Japanese government's latest proposal. Effective bank supervision will be slow in coming and rigorous accounting and capital standards are still distant on the horizon. Without these elements, any Japanese rescue plan is likely to prove itself a bridge to nowhere.

Discussions with private- and public-sector officials in Japan indicated an almost desperate desire to validate this latest plan. Many argued that since they believed the bridge bank is an American concept, the United States would have to persuade the markets that the banking crisis was finally being addressed.

Of course, the plan is neither an American one nor precisely the steps urged on Japan by the U.S. government.

As a result, the U.S. reaction to it was polite expressions of hope in public and straightforward statements of disappointment in private. Financial markets also sent the government a stern message, driving down the yen and the stock market in the days following the bridge bank announcement. Now the Japanese voters have spoken, and they don't like the plan any better.

What is perhaps the most disheartening aspect of the Japanese situation is the frustration expressed privately by those bankers who think their institutions could survive and prosper if the government finally acted.

As long as they are forced to take part in rescues they do not need and extend credit to borrowers they know to be insolvent, these banks will falter and some may even fail.

The best way to fix Japan's banking system is to move rapidly and aggressively to shutter troubled institutions. The longer the government delays, the higher the cost to the public and the worse the economic and political consequences.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.