Forget trying to get toxic assets off bank balance sheets. Only new banks can fix the economy, says Howard Lutnick, CEO of Cantor Fitzgerald and BGC Partners, in a Financial Times editorial.

Take $100 billion of TARP funds to start a big new bank, the First United States of America Bank, and give another $100 billion to existing small banks, he says.

“Without innovative ways to get the economy going, we may not see big improvements in recovery and growth until 2014,” Lutnick asserts.

“The only way to move the economy forward is by new lending. And that requires new banks.”

Despite all the taxpayer-funded bailouts, banks remain unwilling or unable to lend and pump the needed liquidity into the economy, he points out.

But without subprime loans or other distressed assets, the First USA bank would have a clean balance sheet, government backing, and market confidence. It would be immediately able to jump start borrowing, fueling hiring and investment.

¬The government, he says, should also ¬partner with smaller and mid-sized banks to create new subsidiaries with pristine balance sheets.

Small investors are already gearing up for the new era of small bank leaders.

“If you’re a brand new bank with no toxic assets, you’re going to make a lot of loans,” banking executive Don Davis told the St. Louis Business Journal. Davis resigned from Centrue Bank in St. Louis to purchase a stake in a small bank with two partners.

“There are banks that already have bricks and mortar and good people. They just need capital.”