If banks and financial institutions find it difficult to recapitalize (i.e., issue new equity), it is because investors are uncertain about the value of the assets in their portfolios and do not want to overpay. Will government do better at valuing those assets?

In the bad bank model, the government may overpay for the bad assets, whose true value is uncertain. Even in the guarantee model there can be such implicit government over payment (or an over guarantee that is not properly priced by the fees that the government receives).