A monstrous crisis is bearing down on the president-elect, but it is not just about the sinking economy and Barack Obama’s plans to launch a massive economic stimulus. The house that’s on fire is the financial system and the government’s failing efforts to save Wall Street’s largest banks. Bloomberg News reports this explosive fact: the Fed and Treasury have so far obligated taxpayers to cover a staggering $7.7 trillion in potential losses. That is roughly equal to half the nation’s annual economic activity, yet Washington officials continue to treat those bankers like their privileged clients.

Some of the Fed’s efforts are no doubt worthy, but the largest deals to rescue Wall Street firms, like the monster bailout for Citigroup, have already taken on a stench of self-dealing–protecting club members from their self-inflicted wounds and demanding little in return for the public. Bloomberg and others have sued the Fed, demanding that it identify the recipients of its lending and the rotten assets the Fed has taken on its balance sheet as collateral. Fed chair Ben Bernanke imperiously replied that such transparency would be “counterproductive.”

He’s right to worry. Public wrath will swell when people learn the particulars of the extremely generous deal-making with Wall Street. If he’s not careful, Obama will be on the receiving end of the blame. He should seriously consider withdrawing his nomination of Timothy Geithner, president of the New York Federal Reserve Bank, to be Treasury secretary. Geithner is the badly soiled negotiator who worked out some of the most dubious deals. His easy terms protected shareholders and executives but demanded almost nothing from the failing banks for the public. Worst of all, the deals did not work. They have failed to stabilize much of anything and are still putting Wall Street preservation ahead of the national interest. Where is the evidence that we can expect a different approach if Geithner is in charge? Or even that he understands the true dimensions of this crisis? Obama had better get answers up front, or else he might wind up as history’s fall guy.