who are these straw-men?

There are some commentators, pursuing an ideological agenda, who want to use the current crisis to nationalize the entire financial system. That is nationalization in the style of a Latin American despot.

how do you reconcile this statement with Cato’s anti-regulation position? Does it not assume regulation?

If a bank is too big to fail, then it is simply too big. Those institutions need to be downsized until their failure would no longer constitute a systemic risk. Then we can discuss how to untangle the government and the major banks, and create a banking system of genuinely private institutions.

—Quoted from Gerald O’Driscoll, senior fellow at the Cato Institute: WSJ