BofA Bailout a Sign of Federal Inconsistency

"All this TARP money is going to capital. It's just going into the vault and being held onto," says Mendelsohn. "The banks don't know what their net capital positions are. They don't know what these securities are worth."

Pento says "the holes in banks' balance sheets will continue to erode" as long as the economy continues to stumble. He says he sees a solution in an alternative, highly ambitious approach.

"The government is going to have to approach banks in the good bank, bad bank scenario," he says. He proposed government purchases of any assets banks no longer want at a high price. "We are going to have to overpay. That will stop the bleeding on their balance sheets and improve their Tier-1 capital."

On the consumer side, Pento says that the government will have to forgive debt to halt foreclosures and defaults on other debt on Main Street. He foresees the incoming Obama administration implementing such a plan for two reasons: First, because it's the only way to solve the problem; and second, because Obama has said that his No. 1 target is to stop home foreclosures.

Mendelsohn says that mark-to-market accounting, whereby banks' assets are set to the price of the most recent sale, is a culprit in the current crisis. Because banks are unwilling to purchase debt, the value of securities originally designed to be held to maturity has declined enormously. He advocates modeling the assets' value.

"[These assets] were meant to be held to maturity," he says. "I think that would solve a lot of our problems."