By Mark Fisher, Bloomberg

Hindsight is 20/20, especially when it comes to missed trading opportunities. But when the government has the trade of the century at its fingertips and fails to take advantage of it, someone has to play the Monday morning quarterback.

Flashback to 2008: When the government was forced to bail out the financial system, our friends in Washington also had the opportunity to make the trade of the century for the American taxpayer. While Uncle Sam succeeded in the former, he failed miserably in the latter.

Lehman Brothers Holdings Inc.’s shocking fall exposed the instability of the U.S. banks. In the aftermath, it quickly became clear that the collapse of the financial system was imminent without the intervention of the U.S. government.

In a recent interview in the Financial Times, John Thain, Merrill Lynch & Co.’s former chief executive officer, gave an insider account of those dark days: “Once it became clear that Lehman wasn’t going to be rescued and was going to go bankrupt, the group then shifted its discussion to OK, well, how do we prevent this domino effect?”

Within this environment of impending doom, the government had no choice but to play Atlas and save the financial world. Unfortunately, it failed to realize that along with this role came a tremendous opportunity: to capitalize on the situation. In this sense, the government failed to make the trade that would have catapulted the taxpayer — rather than just the banks — back to stability.

Mitigated Animosity

The government had an opportunity to structure the following innovative investment solution: Uncle Sam could have demanded 25 percent to 30 percent of the underlying equity in the banks before agreeing to negotiate a bailout package with the weakened institutions. Had the government brokered a deal that tied bank earnings to taxpayer payback over time, the animosity between Wall Street and Main Street that exists today would have been eliminated, or mitigated at the very least.

I’m certainly not advocating government control of the banks; rather, just the opposite — the government would have taken a passive stake and then stepped aside to let business take care of business.

Unfortunately, our leaders in Washington lacked the shrewdness required to guarantee taxpayers a permanent ownership stake in the banks their money was being used to save. An innovative investment solution could have secured some of the necessary funds to fix our disaster of a health-care system or Social Security mishap.

Negligible Profits

Instead, the government went ahead and lent hundreds of billions in capital to Wall Street, insured all the money-market funds, bailed out companies such as American International Group Inc. and allowed financial institutions to issue government-backed debt while exacting negligible profits in return.

And so I ask: What trader in his right mind decides to dump his money into a glorified black hole, taking on unlimited risk in the process, for minuscule returns? I’m no socialist, mind you. All I am saying is that the banks should have been made to drop off an envelope at the taxpayer’s doorstep every month. Obviously, no one in President Barack Obama’s administration has ever watched “The Godfather.”

Lay-Up Trade

Thus, when confronted with the opportunity to make an epic trade, the government managed to make the worst deal possible — so bad that I’m completely comfortable comparing it to the mistake made by the Native Americans back when they sold Manhattan for $24. Just as the settlers weren’t to be blamed then the banks aren’t to be vilified today. When the U.S. government gives you a lay-up trade, you take it. Anyone in the banks’ position would have taken advantage of the terms they were offered and, frankly, would have been stupid not to.

Had Uncle Sam been a student in my class, he would have gotten an “F” in Sensible Trading and an “Incomplete” in Bailout 101. To put this all in perspective, just consider for a minute how in the world Warren Buffett managed to negotiate a better deal with Goldman Sachs Group Inc. than the government did for the taxpayer. The policy wonks on Capitol Hill should have stuck to what they know best and called in someone like Buffett or bond guru Bill Gross when it came time to negotiate.

Obviously, Federal Reserve Chairman Ben Bernanke and his cronies have learned from the experience of the Great Depression how to repair what has been broken, but they have failed to understand how to capitalize on it.

The jury is still out on the verdict for the bailout, but I would bet good money that the worst is yet to come for the economy. While some are speculating that the financial crisis is over, I’d say we’re still in Act I, with a great deal of financial drama left to unfold.

There’s no question that the government officials who brokered the deal with major banks during the crisis will ultimately go on to become highly respected economists, academics, professors and the like. But I can guarantee that none of them will ever be hired on our trading floors.

(Mark Fisher, author of the 2002 book “The Logical Trader,” is the founder of MBF Asset Management LLC. The opinions expressed are his own.)