The most cost-effective and quick way to address the nation's financial problems would call for the Treasury Department to start breaking up the largest banks and selling off individual operations to the public sector, according to the executive of an independent community bank. Rusty Cloutier, the president and CEO of MidSouth Bank (MSL), recently told major news outlets that "[c]oncentration is a bad thing" and called for the feds to break up the "miserable eight" largest banks that, he said, control 60 to 64 percent of the country's assets, restoring competition to the banking industry and restoring investor confidence in the system. His solution to the nation's financial problems wouldn't mean the government allows major banks to fail -- which is the prospect the Treasury's TARP has aimed all along to avoid -- but instead break them apart to reduce huge conglomerate banking entities to a series of small operations that would be offered to the public sector. Cloutier also argued that private investors are likely to be more interested in putting money into financial institutions that are small and efficient enough to run without a multi-billion dollar capital infusion from the Treasury. "The money is going to sit on the sidelines until [regulators] announce they're going to do something with these [big banks]," Cloutier said, according to statements released Monday by the bank. "Nobody is going to put fresh capital into the banking business when your major competitor is going to be continuously bailed out by the United States government with more and more money." Lafayette-based MidSouth, with $936.8 million in assets as of the end of 2008, received $20 million through the capital purchase program within the TARP. But Cloutier said many community banks like his that hold government money on their hands have considered "giving back" the funds. Other community banks that were set to receive TARP money are now saying they won't accept the funds, he said. Write to Diana Golobay at diana.golobay@housingwire.com. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.