This piece by Sal Rossi accurately summarises the current debate on how to fix banks in the short to medium term.
There are two schools of thought on how to get credit flowing again. One suggests buying the toxic assets, the other says to recapitalise banks. This column says that both approaches are necessary, though the right balance will vary across nations. The real difficulty is aligning incentives – in both pricing assets and recapitalising banks, bank managers’ interests may thwart governments’ objectives.
Buying assets, recapitalising banks, and getting incentives right