The author at Calculated Risk must have read my posts here, because his latest post is spot on.
Some Thoughts on the Bailout
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The underlying problem is that house prices are still too high and no one knows how much further prices will fall. The value of the troubled assets is dependent on future house prices (note: house prices are the key factor for foreclosures and loss severity).
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There are private investors willing to buy these troubled assets right now, but the banks do not want to sell at those prices. Why? Some banks believe the assets are worth more than the current bids (it all depends on future house prices, and different banks and investors have different projections). And many banks are unwilling to accept the current bids because the banks would then be insolvent.
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Goes back to my point earlier. If this was a slam dunk, private money would have jumped in sooner. It isn't a slam dunk. The debt is very difficult to value. Some issues are truly worthless. Others are worth fractions of original value and some yet are worth 10-30% discount of par. Even then, our valuations are strongly dependent on housing prices/default levels.
I like his suggestion at the end; privatize the losses by infusing capital into the banks. Let the shareholders, investors, and banks eat the dung sandwich. Don't let taxpayers suffer for their sins. However, I'd accept honest efforts to minimize the hit to taxpayers.