Nothing matters more now to markets and the economy than how the Obama administration handles the challenge of assisting America's beleaguered banks. We're in a global bear market, a credit crunch and a recession due not only to fundamental problems in banks themselves, but due to the arbitrary and destructive way the U.S. Treasury, the Federal Reserve and the FDIC intervened in Fannie Mae, Freddie Mac, AIG, Lehman Brothers, Merrill Lynch, Washington Mutual and Wachovia.

We've seen what happens when government gets it wrong. Attempting to create confidence in banks, government does just the opposite by acting unpredictably, unilaterally and without accountability. The result is a global crisis.

Since those early tragic mistakes, the banking regulators have started to get it right. Injecting capital in banks using TARP funds, and the rescues of Citigroup (C) in November and Bank of America (BAC) in January were the right things to do. These were legitimate acts of assistance to these firms. How different these were from the earlier interventions, in which it almost seemed as though the object was to punish banks that got in trouble, not help them.

Don't think these latest interventions weren't just because there are still problems in the banking system. Without them, we wouldn't have a banking system right now. And besides, they might not even have been necessary if it weren't for the government's botched interventions during the summer.

The best think about the Citigroup and Bank of America interventions is that they were substantially identical to each other in terms of how they were structured. That started to set up a predictable pattern, eliminating some of the uncertainty from an economy that is, more than anything else, crippled by uncertainty.

But those interventions were made under the Bush administration, and former Treasury Secretary Henry Paulson. Now comes the Obama administration, and Treasury Secretary Timothy Geithner. Uncertainty is back.

Or is it? Remember, Geithner may be new to the Treasury job, but he's an old hand when it comes to bank interventions. As president of the New York Federal Reserve, he had a key role in all the misbegotten interventions that did so much to get us in this mess to begin with. His signature is on the term sheet that had the Fed buy $30 billion of toxic assets from Bear Stearns, to facilitate its orderly takeover by JPMorgan (JPM) almost a year ago. That was the first of the government's big mistakes, and Geithner's bloody fingerprints are all over it.

But that actually gives me confidence. And it's why I was delighted when the Senate confirmed him as Treasury secretary despite his rather embarrassing failures to pay all his taxes. For one thing, if we can't have a tax cutter as Treasury secretary, we might as well have the next best thing -- a tax evader. But that aside, the important thing is that Geithner has personal experience in bank interventions, learning the hard way exactly what not to do. And when it comes to government intervention in markets, knowing what not to do is the most important thing.

So I'm expecting that, next week, when Geithner rolls out the Obama administration's plans for propping up the banking system, it won't be in substance all that much different than what its predecessor did. And as far as I'm concerned, that's a good thing.

I don't doubt that there will be a new mortgage foreclosure mitigation element. But that's a side show. The important thing is what the government does with the banks. And I'm betting that the approach will be more capital injections and more troubled asset guarantees, both on fairly generous terms.

Don't get all indignant that the terms will be generous. They have to be, or there's no point in intervening at all. What's the point of rushing a terribly sick patient to the hospital if the ambulance runs him over in the process?

I know from my emails from readers that this isn't a popular view. There's tremendous anger out there that banks that screwed up so badly in the subprime fiasco are getting bailed out by taxpayer money. I understand. But try to control your indignation. You want the alternative, in which the banking system fails? You won't like that world.

Dealing with that public indignation is why, on Wednesday, the Treasury released rules for restricting executive compensation in banks that get government assistance. You could interpret that as previewing a "get tough" approach to bank interventions. But I don't think that's right. I think it indicates that Geithner intends to be very generous with the banks, just as Paulson was. Pounding his chest about limiting the pay of greedy CEOs is a great way to throw some red meat to an indignant public, while at the same time doing what needs to be done to bail out the banks and save the world economy.

Besides, let's not get too upset about people getting rich off government. Bank CEOs are hardly the only ones who do that. Consider Tom Daschle, who this week had to withdraw from consideration as secretary of Health and Human Services. Not only did he not pay taxes on income. Much of that income -- millions of dollars he earned in the few years since he left the Senate -- came from consulting for organizations to whom he had been consulting, organizations whose fortunes would have been strongly affected by decisions he would have made as HHS secretary.

Stocks now are really trying to make a recovery from the November 2008 lows. With the late January low, we now for the first time in this bear market have a bottom-above-a-bottom -- believe it or not, it's the potential beginning of an uptrend.

A new bull market rising from the ashes? Very possibly, yes. They always start just when you think they can't possibly. And that's surely what everyone thinks now.

But it all depends on next week. Geithner has to decide. Is he going to save the world? Or is he going to destroy it? Make no mistake, that's what this is about. Credit makes the world go around. It's as critical to modern life as electricity.

If Geithner acts wisely the lights will stay on. If he doesn't, the lights will go out.

I'm betting he gets it right. But face it: This is a moment of truth.