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Over the past few weeks, President Obama has at last "pivoted," in the widely used term, from emphasizing deficit reduction to focusing on jobs and taxation of millionaires. Spontaneous protest has done what the organized left failed to do; it has made Wall Street the appropriate target of diffuse economic frustrations. The labor movement has added its weight and institutional skills to these protests, and even President Obama has had some kind words for them.

Fox News and the Republicans have been usefully flummoxed, since it is awfully hard to rise to the defense of the Wall Street banks that caused the financial collapse and to retain credibility with anyone, even the Tea Party base.

But here comes the next phase of the financial crisis, and it will test President Obama's leadership like nothing else. It will also make or break the faltering credibility of Treasury Secretary Tim Geithner.

In recent days, it has become clear that several large banks, most notably Bank of America, are teetering. Though the backlash against the giant bank's proposed five-dollar-a-month charge for debit cards has gotten the headlines, this is the least of its problems. The profits from this new charge would be chump change measured against the bank's chasms of losses, the legacy of its ill-advised purchases of Countrywide Financial and Merrill Lynch in 2008.

Worried investors have driven Bank of America stock down to the range of 5 to 6 dollars a share. Bank of America's books are still glutted with non-performing mortgage loans, and a grand solution to the mortgage crisis seems further away than ever.

Meanwhile, Citigroup and Morgan Stanley with their large holdings of Greek government bonds are also in some jeopardy, which adds to the general crisis of confidence. The Federal Reserve has been throwing "liquidity," otherwise known as nearly interest-free money, at the banks as necessary, to keep inter-bank markets from freezing up as they nearly did in 2008.

As recently as three weeks ago, at a "Delivering Alpha" financial conference, Geithner assured his audience that despite the European crisis American banks were in great shape:

Our financial system -- because of the actions we took early in the crisis -- is in a much stronger position to deal with these new risks than it was before this crisis. Much, much stronger position. Way ahead of the rest of the world in terms of making sure they have a stronger financial foundation to handle any type of shock.

This has been Geithner's strategy since the earliest days of the crisis: work with the Federal Reserve to throw money at the big banks, resist fundamental changes in their business model, and talk up their solvency even in the face of contrary evidence.

Given the proprietary data that Geithner surely sees as Treasury Secretary, he must know that these words are wishful at best and downright deceptive at worst. If his assurances turn out to be so much baloney, then Geithner, President Obama's re-election chances, and the economy could all be in big trouble.

The fact is that European banks are functioning only because the European Central Bank in spite of its reluctance has been flooding the system with liquidity, and at least one U.S bank -- Bank of America -- is barely solvent and heavily reliant on the Fed.

If events turn critical again and we face a repeat risk of the seizing up of financial markets as in the fall of 2008, the Obama administration's rhetorical populist turn will be of no use. The president will need to make a fateful decision.

Worst of all would be to let a large institution like Bank of America just fail. Outside of the hard-core Tea Party right, nobody supports this.

The second worst policy would be to just keep throwing money at a zombie institution to keep up the pretense that it is solvent. We tried that policy in 2008 and 2009. It helped entrenched bankers keep their jobs and their outsized profits, but a wounded banking system continued to be a lead weight on the rest of the economy.