Paul Krugman on Obama's bank plan: heads the banks win, tails the public loses.

Original article

"... 85 percent of the money is going to be a loan from the government, which is a non-recourse loan, which means that it’s backed only by the assets that these guys are buying, which means that if the thing loses more than 15 percent of its value, which is highly, you know, possible, given how uncertain these things are worth, then the investors, the private investors, just walk away. So there’s—exactly, it’s a heads I win, tails you lose. If the stuff—you buy something at $100 and it goes up to $150, you make $50. You buy it at $100 and it goes down to $50, then you only lose $15, because the other $35 gets even by the taxpayer."

The Federal Deposit Insurance Corporation (FDIC) could do it.

"... the FDIC guarantees a bank’s debts, basically, so the deposits are secure, and then if it says the bank is bankrupt, then it goes in and it seizes the bank and then sells the toxic stuff for whatever it can get. That’s what I advocate; that’s what we ought to be doing. ... they’re just daunted by the scale of this thing. The FDIC normally does ... two or three banks a week, even in bad times, and they’re small banks. Here we’re talking about quite possibly Citigroup, which is $2 trillion in assets."