Rebuttal: Peter Wallison is wrong about buying bank assets

American Enterprise Institute senior fellow Peter Wallison writes in an op-ed in the Wall Street Journal that the United States government should avoid nationalizing banks by buying bad assets from banks at prices based on their cash flows rather than their market value:

Both taxpayers and banks could come out well -- and so would our economy -- if the government were to buy the assets at their "net realizable value," which is based on an assessment of their current cash flows, discounted by their expected credit losses over time.

The problem with this approach is that it requires the government to commit hundreds of billions in taxpayer money based on models of risk that didn't work: That's the whole reason we're in this mess!