and we may have a heck of a lot more difficulty getting out. Paul Krugman actually despairs that we will succeed if we implement Geithner's current plan. The plan seems to violate some of the principles espoused by Joseph Stiglitz, another Nobel prize winner, in an article a few weeks ago in which he issued caveats re recovery options.
My concern, at this point when all that's been revealed is not 'official', is probably overly cynical. The plan relies on Wall St. types setting the value of the banks' bad assets via an auction of some sort. We would be co-investors with the private people but the bulk of the transaction (80%?) will be a loan from us. If the value placed on these bad assets by the privates is reasonable, they will make a barrel of money, we will make some. If the value is wrong, they will lose their investment (which I've read is on the order of 3% of the total) and we would lose ours (which is 97% of the investment).
The preceding risk-reward ratio is bad enough. But from what we've seen recently with regard to the ethics of Wall St. types, what prevents the bidders at these auctions from conspiring to set prices to minimize the possible loss to them? After all, we are putting up most of the money yet they will get a disproportionately larger share of the profits that may occur.
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