Three small regional US banks were shut over the weekend, taking to six the number of failures in January — nearly a quarter of the 25 that failed in 2008.

It was an ugly start to the year and one that underlines the failure of the Bush Administration’s $US700 billion bank bailout package, which has been wasted keeping ungrateful money centre banks alive like Citigroup and Bank of America, rather than attacking the root causes of the problem — imploding US housing and real estate sectors.

The fourth-quarter economic growth figures for the US confirmed the size of housing’s problem with real residential fixed investment dropping 23.6%. Foreclosures jumped sharply in the quarter to end the year up 81% on December 2007.

No wonder US banks are flopping around and failing. Fannie Mae and Freddie Mac, the two now Government-controlled housing mortgage operators want another $US51 billion to keep going.

The latest failures again reinforce the need for a credible bank bailout approach and fund from the US Government.

The closures in Florida, Maryland and Utah bring the total number of failed banks this month to six, the worst month for failures since the current crisis started. None of the trio were large — the biggest asset pool was $360 million in Florida.

The failures signal that the financial crisis is continuing to destroy financial institutions and the confidence the public have in them.

The $US700 bailout fund set up by the Bush Administration is broken. It’s wasted money, half of it has been spent, billions wasted and it hasn’t controlled bank excesses, managerial incompetence or forced them to lend more money, especially to housing.

A centre piece of the new program will be to revamp the fund to ensure that taxpayer money is not used to fund excessive pay, bonuses and dividends to shareholders.

Media reports in the US and UK say a “Big Bang” approach is being driven by former New York Fed boss, Tim Geithner, now Treasury Secretary, and Lawrence Summers, Obama’s National Economic Council director.

The Financial Times and Bloomberg both made it clear (from briefings, of course) that Mr Geithner intends to present a comprehensive plan that policymakers hope will command market confidence.

Details of the new approach have yet to be approved by President Obama, but it may include both the purchase of toxic assets by a so-called “bad bank” and insurance-style guarantees for problem assets remaining on bank balance sheets.

That’s a combination of approaches from the Savings and Loan clean-up in the 1980s and the approach the UK Government has taken to try to get bank lending back underway.

But several media reports say the plan is likely to refrain from imposing tougher restrictions on executive compensation at most firms receiving government aid, but instead will keep the looser requirements (initially at least) included in the original $US700 billion program.

That will almost certainly guarantee it a rough ride in Congress, especially from Democrats after the Merrill Lynch $US4 billion bonus scam last month, the sacking of Merrill’s former CEO, John Thain, for his part in those bonuses and spending $1.2 million on new office facilities, and the stupid move by Citigroup to spend $US50 million on a new corporate jet until it reversed the decision under pressure from the Government and the media.

This omission of tougher controls on pay, bonuses and management appears to be odds with President Obama’s criticism of the news that US bankers were paid bonuses of $US18 billion in 2008, according to an estimate published last week.

The latest edition of The Economist magazine summed up the feeling about bankers, even at that nest of free market supporters: “Looting Stars” was the headline on the story in the Finance section. Appropriate.