Bailout purgatory is bad for everybody, apart from the banks, their shareholders and their unsecured creditors. As Roubini points out, the government has been siphoning money into banks via capital injections, loan guarantees and financing with no strings attached.
For example, despite being in receipt of billions of dollars of taxpayer-funded bailouts, banks have only marginally cut dividends since the crisis began. This means bailout funds have being going in one door and out the other (much like the flow of bank executives into government and back to banks again). Banks have paid out a whopping $400 to $500 billion in dividends in 2007 and 2008.
There are also reports that Citi and BoA have been buying back AAA-tranches of non-prime mortgages-backed securities: the very same junk the government is trying to remove from their books via the PPIP.