Fundamentally, that is the Bernanke/Paulson Bailout Plan -- take $700B, buy up non-liquid, depressed assets at above market price to inject capital into Wall Street at just the right places to keep the whole thing from seizing up.
And, if this were just a crisis of liquidity, this might not be such a bad plan -- use the power of the government to forcibly inject liquidity into the market, and then resell the assets we've collected later, reintroducing them into the market at a slower rate then they were pulled out. If we believe in the market, then the market can work itself out with a little bit of lubrication.
Depending on how much the assets end up being worth when we resell them, the taxpayers might not even be losing the entire $700B. It's even possible that we could make a profit, since the prices of these assets are currently depressed by the liquidity crisis.
But wait, there's more...
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