I am amused how politicians and pundits on the economy are looking for people to blame for the current crisis on one hand while pinning their hopes on "white knights", who will save them. Also, like a desperate stage IV cancer patient, they believe that if they can just find the right cure, they can reverse the irreparable damage caused by decades of abuse.
There is no "fix". Losses have been accrued. You can write them off the books or not. The money is still gone. If the government bails you out and makes your loss good, then the government takes the loss. It's still a loss. Increasing regulation and oversight is fine but it won't bring back the losses already incurred.
The Dow is soaring this afternoon, because of reports that Hank "I used to run an investment bank" Paulson is going to set up an RTC like organization to dispose of defaulted bonds. Why? A loss is still a loss. What is really driving the rally is the hope that the government will bail the banking sector out and let the taxpayer take the losses. With Hank Paulson running things, that's exactly what might happen.
So, who would you rather see go broke? Your bank or your government? I don't even really see a difference. The end result is the same.