If banks are zombies, does that make the taxpayer their flesh?

I am still convinced that the best approach to this crisis is to be skeptical and assume that the general consensus underestimates the actual problem.  After all, the stress tests were designed to reflect worst-case scenarios, but those scenarios are already our current state; in other words, three months ago our leaders did not (publicly) believe the situation could be than it is currently.

This point dovetails with Matthew Richardson and Nouriel Roubini’s recent opinion piece in the Wall Street Journal. I agree with the all the details of the piece; they again reinforce the intellectual and courage bankruptcy of our financial sector and some of our leaders.  What the piece reveals is just how dangerous we are to sliding into a Japanese era of muddling through; Summers’ policy of treating this as a probablistic crisis which we must suffer through is rather asinine.  We have sat around and waited long enough, but eighteen months later this crisis has not resolved itself.  Our banking system is characterized by zombie banks and this pleases the banks because management still receives their huge salaries.  This is not a game of management thinking it knows better than the government, this is a game of management protecting its oligarchic lifestyle.  That is the most convincing rationale to explain why executives would substitute cheap government capital for more expensive private capital.