Well, it appears that we have Nobel Prize winner Paul Krugman, Portfolio’s Felix Salmon, and the Financial Times’ Willem Buiter’s all calling for nationalization.

Basically, all three of them say, and I agree, that that the banks are “zombie banks”, dead but still walking, and that the most effective, and the most cost effective for the taxpayer, solution is for the government to take them over and allow their problems to unwind.

They all agree that the idea of the “bad bank”, basically the Resolution Trust Corporation (RTC) from the S&L bailout, but without taking over the banks, is among the worst possible solutions.

Basically, if you buy these banks assets at market value, they are still insolvent, and if you overpay, the taxpayer loses and the banks are encouraged to do more stupid things.

To my mind, I would actually set up a government agency to directly make loans to business, and let the banks all hang…What I have repeatedly called “amputating the financial sector.”

I would add that with banks publicly declaring that they will take the money and not open up their lending, we need some serious tough love hate headed towards the banks.