By the middle of next month we will know whether Brian Lenihan, the Finance Minister, is a man of his word or a patsy for the banks. In mid September he will give the first hard information on how much he proposes to pay those banks for the bad loans that have brought them to their knees. Last week, after he had published the draft legislation for the National Asset Management Agency (Nama), Lenihan talked the talk on the hard bargain that he would drive for taxpayers.

"We start with the market principle," he told RTE's Morning Ireland. "I think that's fundamental in this valuation procedure. Some allowance can be made for longer-term economic value, but it can't be used ... to benefit shareholders of banks. It has to be on the basis of the fundamental fairness of the price."

Taken at face value, Lenihan's confident belief in the primacy of the market suggests that the banks, their shareholders and the stockmarket analysts who follow them, are in for a brutal shock come September 16.

Ever since Nama was conceived as the rescue package of choice, shares in Bank of Ireland and AIB have climbed 10-fold and more from their low points as the markets decided that the Government would rather fleece its own taxpayers than countenance nationalisation. The rising share prices do not reflect confidence in the banks, or confidence in the Government's strategy: they simply represent the markets' view that shareholders, not taxpayers, will be the winners.

Lenihan, if we believe what he said last week, is about to confound that view. If he really does deliver on his promise to make market value the key factor in his decisions, he has an outside chance of convincing a deeply sceptical public that the Nama proposals are a gamble worth taking.

If, however, his smooth assurances turn out to be yet more spin and nonsense, then Nama will be launched against a howl of public outrage that will bring down his Government and lacerate his party.

Lenihan must be in no doubt that the Irish people see Nama as yet another bail-out for bankers and for property developers. That scepticism is writ large in today's opinion poll: 83 per cent believe that the taxpayer will not get a return from their multi-billion investment in Nama, and 85 per cent believe it is a bailout fund for the banks. They have no faith in this Government -- the dissatisfaction ratings for Brian Cowen, the Taoiseach, are 78 per cent, with Lenihan at 66 per cent -- and none whatsoever in the banks.

In the financial community, the consensus of the moment is that the Government, through Nama and with our money, will pay generously over the odds for the collection of good, bad and awful loans that would otherwise destroy AIB, Bank Of Ireland and the rest of the Irish-owned banking sector.

Bank analysts and economists talk of the 'haircut' that the banks will have to take -- the discount that will be applied to their loan portfolios -- and guess that it will be less than 25 per cent of the loans' values. Conspiracy theorists -- and there are many -- believe that the price the Government pays will be dictated not by a proper valuation of the loans, but by a calculation of how many billions the banks can afford to write off without falling into government ownership.

What the analysts, economists, conspiracy theorists and the broader public share is a firm belief that Lenihan and Nama will favour the banks, not the taxpayers. It is a dreadful place from which to start the most expensive and important piece of legislation that any government has had to introduce.

We have all been numbed by the figures that accompany this recession, but even still the figures for Nama are eye-wateringly huge. Loans with a notional value of €90bn -- 90 thousand million euros -- have to be bought by us from the banks. Not all of those loans are bad, but many are dreadful. Lenihan cannot, yet, tell us how much we will lose on the deal but it could be scarily high. If, as the experts expect, Lenihan pays too high a price for those loans, we could lose up to €30bn -- and that is without counting the vast opportunity cost of tying up so much money for so long.

While the losses could be horrendous, a second consequence of paying too much for the loans will be that the same banks and same developers will buy them back from Nama (at a discount, of course) in the years to come, triggering a second wave of disgust. But apart from the losses, there will be a total evaporation of public support for the Government and for the political system if our money is thrown at the banks. It cannot be allowed to happen. Lenihan has to build on what he told RTE and he has to transform himself into the most aggressive defender of the taxpayers' interests. Now that he has decided to go down the Nama route, he must see it through to its logical conclusion, and he must be crystal clear about whom he represents.

His primary objective is to pay as little as possible for those loans. Their market value is difficult, but not impossible, to establish and Lenihan should avoid the euphemisms of 'long-term economic value'. Every mortgage holder in the country who is stuck with negative equity would bite Lenihan's hand off if he offered to buy their homes for their long-term economic value -- who doesn't want a 2020 price for 2009 property? -- but to take that route with the banks would be a criminal waste of our money.

Paying above the current market price assumes, for no good reason, that our property slump is already at an end and that prices have no further to fall. It assumes, too, that there will be future market buoyancy. Those hopes may be fanciful, particularly if the courts refuse to protect builders who are pursued by banks from outside the State. Rabobank's pursuit of the millions owed to it by Liam Carroll's collection of companies could force a sale of properties that provides a true market price. It may be a firesale, but that's the only type of sale there is in a recession for a bust developer.

The unavoidable consequence of playing hardball with the banks is that the State will end up owning them, but temporary nationalisation is the least worst solution once we have chosen Nama as the optimal course of action. Nama and nationalisation are not competing options, they are complementary ones.

For Lenihan, the challenge is immense. He, not Brian Cowen, is now the most important player as we enter our economic endgame.

It is Lenihan who will oversee the birth of Nama; it is Lenihan who will have the ultimate power to decide how much the taxpayers will pay for the loans, and Lenihan who wields the enormous power that the draft legislation bestows.

That transferral of power over what really matters is not just from Cowen to Lenihan, but also from the Department of the Taoiseach to the Department of Finance. Under Bertie Ahern and then Cowen the Taoiseach's department had replaced finance as the alpha male in the permanent government but recession has forced a role reversal and finance now cracks the whip.

Cowen's irrelevance was demonstrated in an inane press conference on Thursday when his considered take on Nama was that 'doing nothing was not an option'. He could have stayed at the Galway races, supping his pints and gladhanding the faithful, and no one would have noticed or cared.

Lenihan, though, does not just hold the economy in his hands. His handling of the banks will have a profound and lasting effect on the public's faith in government and, ultimately, in democracy itself. The first step to restoring faith comes with the valuation of the banks' loans. If Lenihan champions the taxpayer, no matter what it means for the current owners of the banks, he will start the healing process. But if he becomes the bankers' patsy, throwing our money at their mistakes, then he will reap the whirlwind. The people's patience is wearing very thin. They know that there have to be massive cuts in government spending, they know about job losses and business closures, about negative equity, wage cuts and loans that cannot be repaid, and they know that there will be sacrifices for years to come.

Those hardships can be borne -- just -- if they are part of a defined path to recovery, but not if they are part of the price of insulating banks and their shareholders from the consequences of their follies. There has to be moral hazard -- for bankers, for failed developers, for politicians -- and Lenihan has to appreciate the difference between protecting the system of banking and protecting the current owners of that system.

The first matters a lot, but the second not at all.