No Plan B - "Cash For Trash" = Another Taxpayer Bailout/Gaming Geithner's Plan

If progressives haven't yet sussed out Barack Obama's hardline centrist ideology the Geithner version of Hank Paulson's "cash for trash" toxic asset bailout should make it abundantly clear; fix this momentary glitch in a perfectly acceptable financial "engine" with as much taxpayer debt as needed and move on, preferably into mortgage refinancing, and let the housing bubble re-inflate! If this doesn't work, then poof! we'll create another trillion out of nothing and try something else! Even if Geithner's hedge-fund enrichment program is on the money, the problem of scale remains; AIG alone still has 1.6 trillion of unsecured debt while TALF is only budgeted out to $500 billion, with an option for 1 trill.

In a March 24 column for Vox EU, economist Jeffery Sachs lambasted the FDIC "subsidy" that will be built into toxic asset purchases:

The investors will bid substantially more ...(than face value)... because of the massive subsidy implicit in the FDIC loan. The FDIC is giving a "heads you win, tails the taxpayer loses" offer to the private investors. Specifically, the FDIC is lending money at a low interest rate and on a non-recourse basis even though the FDIC is likely to experience a massive default on its loans to the investment funds. ... In essence, the FDIC is transferring billions of dollars of taxpayer wealth to the banks.
Don't think this "nuance" has escaped Big Finance. On thursday the Wall Street Journal reported the curious phenomenon of Citigroup and Bank of America buying up big-time "toxic sludge" off the secondary markets. With FDIC asset price inflation guaranteed, Citi and BofA are just booking first-class passage on the PPIP gravy train. What suckers these taxpayers be!
Of course the bottom line is WILL PPIP loosen credit and restore lending? Economist James Galbraith doesn't think so. In his superb March 23rd article in the Washington Monthly, Mr. Galbraith is direct:
... The most likely scenario, should the Geithner plan go through, is a combination of looting, fraud, and a renewed specualtion in volatile commodity markets such as oil. Ultimately the losses fall on the public anyway, since deposits are largely insured. There is no chance that the banks will simply resume normal long-term lending. To whom would they lend? For what? Against what collateral? And if banks are recapitalized without changing their management, why should we expect them to change the behavior that caused the insolvency in the first place?
This kind of straight talk is verboten in the MSM, even for upscale liberal platforms like The New Yorker, where inferring that Geithner so far seems intent on saving Big Finance from any undue hardship at taxpayers' expense is "paranoid politics" according to George Packer. Your Humble Dissembler's assessment is if it looks like an asset-price-inflated FDIC-facilitated taxpayer bailout you can probably dispense with "smells like" and "tastes like".