Yes, that would be a way to meet the demands outlined in the original letter (give or take a few unimportant details). But the ECB would have to rediscount the Greek sovereign bonds at virtually no haircut in order to make such a bank viable.

Whether the ECB rediscounts the Greek bonds directly or by proxy through the Greek central bank and via the purifying power of the bid-ask spread of a nominally private (but in reality government-controlled) bank is a matter of the most supreme indifference as far as the real economic impact is concerned. So if that is what it takes for the Austrianist chickenhawks at the ECB to save enough face for them to comply, then that's perfectly fine.

- Jake

Friends come and go. Enemies accumulate.