What's the alternative to another bank-bailout?

In a column in the Telegraph, Andrew Lilico attempts to answer the question of "what's the alternative to another bank-bailout" from the perspective of an economist (which he happens to be for Europe Economics and as a member of the Shadow Monetary Policy Committee).

Using a style of presentation that has been perfected by the economics profession, he starts his column off without stating his key assumption.  The key assumption in this case being that it is known to all market participants which banks are solvent and which are insolvent.

As regular readers know, without each bank disclosing its current asset and liability-level data, market participants do not have the necessary information to determine who is solvent and who is insolvent (remember, solvency is based on the relationship between the market value of a bank's assets and the book value of its liabilities).

Without this disclosure, his key assumption is not true and until the key assumption is true it makes no sense to implement his recommendations.

I apologize to Mr. Lilico for using his column as an example.  

If British banks become distressed again, I’ve argued repeatedly that the government should not bail them out. But what should we do instead? Here’s what.

•  Banks that are comfortably solvent, with proper cash management procedures, should be provided with unlimited liquidity by the Bank of England. This is not a form of bailout....

• Banks that are insolvent or nearly insolvent, but which have business models that are likely to be value-generating should have their bonds (including senior bonds) converted into equity, so as to recapitalise them and place them in the hand of new owners, for restructuring if necessary according to the new owners’ timetable....

• Banks that are insolvent and unviable, value-destroying entities should be broken up, wound down, liquidated....