William Black was one of the tough regulators during the S&L crisis. He knows what is going on and knows what needs to be done.
According to Mr. Black:
The FDIC is sitting there knowing that it has both the residential disaster and the commercial real estate disaster [and] knowing it doesn’t have remotely enough funds to pay for it.
People use different terms to explain this fraudulent behavior. “Extend and pretend” and “kicking the can” are two of the more popular ones. No one should be fooled at the BS emanating from Washington. The banking system is insolvent, just as Japan’s was (still is?) twenty years ago. For a former insider’s take on what is happening, read the interview that Mish put on his site.
Our alternatives are fairly simple. We can face up to the fact that the
US and many of its financial institutions are insolvent, letting normal bankruptcy procedures reduce the excess debt. Or, we can continue to play the 
stupid game of “everything’s fine; the stimulus has worked; we are in a recovery.” That alternative will kill the economy for at least ten years. It may also cause it to completely collapse if hyperinflation occurs.
We are in a Depression. We should face up to that fact and deal with how do we best get out, both quickly and in a manner that will allow the economy to begin growing again. Instead, we have chosen the other route which was, according to Black, deliberate:
… Geithner and Summers were selected and promoted, and the same is true with Bernanke, because they are willing to be wrong and have a consistent track record of being wrong. That’s useful for senior politicians but disastrous for the country.
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” we can continue to play the stupid game of “everything’s fine; the stimulus has worked; we are in a recovery.” That alternative will kill the economy for at least ten years. It may also cause it to completely collapse if hyperinflation occurs.
We are in a Depression. We should face up to that fact … Instead, we have chosen the other route which was, according to Black, deliberate:”
If Mr. Black is correct about the intentionality of the route chosen, what is the reason? I can only see two possible explanations; more “kick the can down the road” or something much darker. Given the intentional raising of debt to levels which ensure sovereign bankruptcy and/or the probability of out of control inflation, which is the more plausible explanation?
Political cowardice is my answer.
Hard solutions are never undertaken if they can be put off. To solve today’s problems would require admitting the Ponzi Schemes that government has created. The one’s solving the problem were complicit in creating it.
Furthermore, it would expose government in Bastiat’s terms as the myth that we can all live at the expense of someone else.