Of course, the real issue in front of us right now remains whether or not to nationalize the worst of the Too Big to Fail Banks. As reported in the NY Times, Geithner’s “stress testing” is already starting as regulators have descended on Citigroup, BofA, and others. Nationalization may be one of the outcomes. Until this issue is resolved the markets will remain on edge.
As Martin Wolf says in the Financial Times,
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.