Krugman on the Banks, Zombies Everywhere!

Paul Krugman continues to get pessimistic. He is depressed over the Obama administration's inability to clean up the banks:

Ben Bernanke’s testimony over the past two days gives us our best clue yet about where the administration and the Fed are going with bank rescue. And the answer seems to be … nowhere. ...

As long as capital injections are seen as a way to bail out the people who got us into this mess (which they are as long as the banks haven’t been put into receivership), the political system won’t, repeat, won’t be willing to come up with enough money to make the system healthy again. At most we’ll get a slow intravenous drip that’s enough to keep the banks shambling along.

More and more, it looks as if we’re headed for the decade of the living dead.

This is seriously depressing. I think Krugman's nailed it. It means the US will be like Japan in the 1990s... underwater and furiously dog paddling to survive. It is stupid not to kill the bad banks and let the few good ones and all the possible new banks grow up to replace them. But I guess all that payola that Wall Street gave to Congress via "political donations" has bought this grim scenario. Bad news. Very bad news.