Chilling out vs. Killing the Zombies

I want to put these two guys in a room and watch them fight:

Nate Silver: Give Geithner a Break

I'm sorry, but somewhere between 99.9% and 99.999999% of us are severely underqualified to be making policy recommendations on this particular issue. And I'm certainly in the majority on this one. My anecdotal experience for the past several months has been that the more someone knows about the economy, the more they know (or at least are willing to admit to) what they don't know. Anyone who is professing with certainty that this or that will work -- nationalizing the banks, for instance -- is an idiot.

Martin Wolf: Why Obama’s new Tarp will fail to rescue the banks

The correct advice remains the one the US gave the Japanese and others during the 1990s: admit reality, restructure banks and, above all, slay zombie institutions at once....Mr Obama is taking a huge gamble. He should have resolved to cleanse these Augean banking stables. He needs to rethink, if it is not already too late.

My own fury at Wall Street's ineptitude and greed makes me predisposed to any plan that involves making Wall Street suffer - a LOT, but I'm genuinely confused.

I've never understood how the government buying bad investments is a good deal for the government. I'm sure the banks selling them would disagree - but I'm pretty sure they're only interested in their own survival.

Geithner's "We'll tell you the details later" approach makes me think there's still wrangling going on - but if Mr. Wolf is right, we're already sinking and emerging details are just where to put the deck chairs.

Cripes.

I wish I knew.

Late edit: 
This NYT article is very encouraging

Nearly 100 federal banking regulators descended on Citigroup in New York on Wednesday morning. Dozens more fanned out through Bank of America, JPMorgan Chase and other big banks across the nation.

[snip]

At the center of this effort, part of the Obama administration’s plan to shore up the nation’s financial industry, is a new stress test for banks that federal officials are devising.

[snip]

“What you are left with is that we are going to nationalize banks that fail the stress test,” [Stanford Group analyst] Mr.[Jaret] Seiberg said. “How many big companies are going to want to do business with government-run banks?”

CalculatedRisk explains:

It sounds like the stress tests could be completed within "weeks" at some banks, and I think 30 days is sufficient for all 18 or so banks with $100 billion in assets.

The banks will probably fall into one of three categories:

1) No additional assistance required. These banks will definitely want this publicized!

2) The banks in between that will need additional capital. This is where the Capital Assistance Program comes in...

[snip]

3) Banks that will need to be nationalized or sold.