So the latest incarnation of the bank rescue plan is as follows:
Banks have crap. Changes in accounting rules allow banks to paint crap gold. Bank buys “gold” from other banks at prices that allow it to declare itself healthy by selling off its own “gold”. This is a viable business model because the “gold” purchases are funded by “non-recourse” governmental loans. “Non-recourse” means we take the hit if they can’t pay, and they keep the profit if they can. The mere presence of all these quote marks ought to signal that something isn’t quite right here.
This can’t be any healthier for the economy (or for capitalism as a whole, or American governance) than keeping GM and Chrysler on permanent life support, and it seems a lot more expensive.