I remember it so clearly–a memorable illustration from one of my childhood books, Gulliver’s Travels. There he was, huge Gulliver lying flat on the ground, bound in ropes, an unlikely prisoner in the land of the Lilliputians.

Somehow it’s an image that keeps replaying in my mind as the havoc in financial services, and the banking sector in particular, continues unabated. In this case, however, it is the federal government that has become Gulliver, the unlikely prisoner of institutions that sport the now-hated moniker “too big to fail.”

What’s ironic about this is that these institutions–Citigroup, Bank of America, AIG–used to be (if we continue with Gulliver for a while) inhabitants of Brobdingnag, the land populated by giants who were 60 feet tall.

I guess this just shows that Einstein was right when he said, “Everything’s relative.”

Those once-mighty Brobdingnagian institutions, having been evicted from the land of giants, now appear Lilliputian vis ? vis the only behemoth left in town–the federal government.

So there they stand, looking for all the world like another archetypal image, Oliver Twist with his bowl in his extended hand, asking the dispenser of gruel in the workhouse for “more.”

Unlike the gruel master, however, the U.S. government has not yet gone apoplectic in disbelief. With all due respect, I think it’s about time.

The big question of the moment is will some of these mortally injured giants be nationalized? Just how big a stake, I wonder, do the feds need to have before an institution is considered nationalized?

If the government owns 80% of AIG, is that not a de facto nationalization? If, as has been reported, there is a third infusion into Citigroup and the feds’ stake goes to about 40%, is that not a de facto nationalization?

Uncertainty is running rampant because no one seems to know how deep the hole is that these companies have dug for themselves. But what is startlingly clear is that the hole keeps getting deeper with each passing quarter and the government has to keep refilling it.

The latest reports say that AIG’s loss for the fourth quarter of 2008 will be in the area of $60 billion. This is almost incomprehensible. According to the latest Fortune 500 rankings (for 2007), there were only 36 companies in the U.S. that reported revenues of $60 billion or more.

Incidentally, it was interesting while going over the Fortune list to see how many of those companies in the 36 have now taken some kind of handout from the government–General Motors, Citigroup, Bank of America, J.P. Morgan Chase, AIG, Goldman Sachs, Morgan Stanley, Merrill Lynch, and just below the cutoff at #37 and #38, respectively, Lehman Brothers and Wachovia (remember them?).

Out of those 10 companies, 9 are in the financial services sector, making it obvious that some kind of madness seized the business and that the after-effects and rehab will be long and painful.

And so it is, as Citi and AIG, among others, have to keep coming back to the trough. These once-60-foot giants seem to lose body parts and grow shorter each time they come back for a refill. First, they were cut off at the knees, then the waist, and finally, the neck, so that all that’s left is a big head reminiscent of those on Easter Island.

Why not end this agonizing dying process that is keeping us all hostage to their slow seepage by enacting the foregone conclusion in one fell swoop? Find another name for nationalization, since that seems to give so many people the jitters, and then do it. And do it soon.