Paul Krugman: breaking the bank?

I'm with Felix Salmon--Paul Krugman's unequivocal declaration that this is an insolvency problem seems borderline irresponsible. What insight does a Princeton trade economist have into bank balance sheets that almost all other observers lack? I'm not near Wall Street any more, so take this for what it's worth, but what I'm hearing is indignation that JP Morgan and the Fed got such a sweet deal out of Bear's shareholders, not worry that either one will take a bath.