To ease the ongoing credit crisis and get banks lending again, the Obama administration realizes that it first has to resuscitate the “shadow financial system” that’s dominated by hedge funds and other large-scale private investors.

Surprisingly, two key ingredients of this turnaround formula will be structured investments, such as asset-backed securities, andleverage - the combination and poorly policed use of which acted as the accelerants that helped fuel the financial inferno that’s now sweeping the globe in wildfire fashion.

But the reality is that new U.S. Treasury Secretary Timothy F. Geithner probably realizes that he has little choice.

Nevertheless, there are problems throughout this plan, says Shah Gilani, a retired hedge fund manager and credit-crisis expert who is a contributing editor to Money Morning.

“Maybe I don’t get it because I’m not on the inside of the new Treasury fire-fighting team,” Gilani said. “But it strikes me that the part of the proposed plan to stimulate consumer loan growth by courting opaque hedge funds with an offer to lend them as much as $95 for every $5 they put up, at a giveaway interest rate, so they can buy new security pools of already overly leveraged consumers’ additional borrowing obligations, is like trying to put out a fire with gasoline.”