That’s more or less what the usually understated Yves Smith says today about the preview of the Obama TARP plan, “Team Obama is taking the cowardly approach of distributing the costs among the most disenfranchised group in the process, namely the taxpayer, when there far more obvious and logical groups to take the hits.”

It’s not just Smith. I got an email from a good friend at a hedge fund last week. He’s a *very* moderate guy, and he had this to say:

The one thing that I disagree on is that for all the talk of making Tarp II diff from Tarp I, I don’t really see it happening. An aggregator bank still just takes bad assets from a bank in exchange for capital. If you pay market, the banks will be insolvent, so they won’t participate. If you pay above market, you’re basically just injecting capital in to the banks, which is what they did in Tarp I. Why are they scared of nationalizing? Citi is an insolvent bank – wipe the equity, take the company, remove the bad assets, put the remaining good company back in to the public markets, repeat for the next insolvent bank. If they try to let a Citi (or maybe evan a BofA) earn their way out of this we will end up with huge parts of the banking system in zombie mode, a la Japan. That would be very bad and will only prolong the pain.

This is the where the rubber of necessity hits the road of The New Politics. In order to save the American economy, it’s increasingly clear we need to kill off some banks. In words of one former Wall Streeter, play “good bank, bad bank.” But playing “bad bank” means taking on Wall Street’s power in a concerted way. This is not a question of technical merits of policy, it’s a matter of taking on entrenched power. Unless the Obama WH can find it within itself to do it, we may all be very, very screwed.