GEITHNER DOESN'T GET IT

There is NO market for crap and trying to make one is just pissing away good money. We need to segregate the good stuff from the toxic assets and that means some banks will have to be nationalized. Geithner seems to think that the Free Market Fairy was pre-occupied with other issues and will now swoop in to save "capitalism."

Atrios gets to the point a little quicker: This is bullshit. A commenter at Naked Capitalism has a slightly longer take:

Let's start with the basics. The US banking system is insolvent. Got that? Insolvent. That does not mean every bank in the US is toast, in fact quite a few are probably just fine, and another large group is no doubt hurting and undercapitalized, but a couple of years of not shooting themselves in the foot again would enable therm (via earnings) to rebuild their equity bases sufficiently to proceed more or less as normal.

But the history of major banking crises unambiguously shows that insolvent financial institutions need to be resolved. There are variations on the theme: the government can take them over and recapitalize them, clean them up and re-sell them, a la Sweden; you can wipe out equity investors and bondholders; you can try new twists, like various good bank proposals that have surfaced lately (making new entities out of the deposits and good assets and leaving the dreck with the existing bond and shareholders).