I think Krugman is right. We are stuck with these zombie banks and Tim won't pull the trigger.
On this side of the Atlantic, Tim Geithner seems committed to the view that banks should stay private even if they’re bankrupt, because — well, just because.
And we have the spectacle of James Baker — James Baker! — attacking the Obama administration from the left, calling for temporary nationalization of zombie banks as part of the recapitalization process.
The sickening feeling of drift — the sense that policymakers are refusing to face hard facts, and are dithering while the world economy burns — just keeps getting stronger.