dday gives the state of play on the Geithner plan, below. I don't have a whole lot to add except that everything I'm reading makes me feel like I'm on the other end of a phone call with Bernie Madoff telling me not to worry my pretty little head about the details, I'm gonna be rich,rich,rich!
The only way to look at this that makes any sense is to believe that the toxic assets are actually worth more than everyone outside the government thinks they're worth. And that requires that we give ourselves up to the faith-based notions of the last administration, in which we simply buy in because "they must know things we don't." Whenever that happens, it's time to be very, very skeptical.
The Obama administration is now completely wedded to the idea that there’s nothing fundamentally wrong with the financial system — that what we’re facing is the equivalent of a run on an essentially sound bank. As Tim Duy put it, there are no bad assets, only misunderstood assets. And if we get investors to understand that toxic waste is really, truly worth much more than anyone is willing to pay for it, all our problems will be solved.
We are dealing with magical thinking again. There is a way to determine exactly which loans are toxic and properly value all these assets. James Galbraith talks about it in this discussion of the Geithner plan this morning. And it's spelled out in more detail by William Black here. (This William Black, btw, so he knows a thing or two about corrupt bankers.) But that could result in criminal prosecutions, which is against the rules. Bernie Madoff will be crucified for all their sins.
I'm getting more and more convinced that Matt Taibbi is right: we are officially, royally fucked.
Update: Krugman has more here.
Update II: Atrios has posted a tweet from Stephanopoulos that further validates the "gun to the head" thesis. Either call off the congressional dogs or well kill the financial system once and for all. Of course, they are aiming the guns at their own heads, but nobody ever said they were geniuses. Oh wait ...
Update III: Speaking of geniuses, why in the world can't these people get that they are making things worse and just STFU? It's nuts.